House Hearing, 112TH Congress - Epa's Impact On Jobs and Energy Affordability: Understanding The Real Costs and Benefits of Environmental Regulations

EPAS IMPACT ON JOBS AND
ENERGY AFFORDABILITY: UNDERSTANDING

THE REAL COSTS AND BENEFITS OF
ENVIRONMENTAL REGULATIONS
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND

ENVIRONMENT
COMMITTEE ON SCIENCE, SPACE, AND

TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
WEDNESDAY, JUNE 6, 2012
Serial No. 11288

Printed for the use of the Committee on Science, Space, and Technology
(
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2012
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,
EDDIE BERNICE JOHNSON, Texas
Wisconsin
JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas
LYNN C. WOOLSEY, California
DANA ROHRABACHER, California
ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland
BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma
DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois
DONNA F. EDWARDS, Maryland
N, New Mexico
W. TODD AKIN, Missouri
BEN R. LUJA
RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York
MICHAEL T. MCCAUL, Texas
JERRY MCNERNEY, California
TERRI A. SEWELL, Alabama
PAUL C. BROUN, Georgia
FREDERICA S. WILSON, Florida
SANDY ADAMS, Florida
HANSEN CLARKE, Michigan
BENJAMIN QUAYLE, Arizona
SUZANNE BONAMICI, Oregon
CHARLES J. CHUCK FLEISCHMANN,
VACANCY
Tennessee
VACANCY
E. SCOTT RIGELL, Virginia
VACANCY
STEVEN M. PALAZZO, Mississippi
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
SUBCOMMITTEE
ON
ENERGY
AND
ENVIRONMENT
HON. ANDY HARRIS, Maryland, Chair

DANA ROHRABACHER, California
BRAD MILLER, North Carolina
ROSCOE G. BARTLETT, Maryland
LYNN C. WOOLSEY, California
N, New Mexico
FRANK D. LUCAS, Oklahoma
BEN R. LUJA
JUDY BIGGERT, Illinois
PAUL D. TONKO, New York
W. TODD AKIN, Missouri
ZOE LOFGREN, California
RANDY NEUGEBAUER, Texas
JERRY MCNERNEY, California
PAUL C. BROUN, Georgia
CHARLES J. CHUCK FLEISCHMANN,
Tennessee
EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas
(II)
CONTENTS
Wednesday, June 6, 2012
Page
Witness List .............................................................................................................

Hearing Charter ......................................................................................................
2
3
Opening Statements
Statement by Representative Andy Harris, Chairman, Subcommittee on Energy and Environment, Committee on Science, Space, and Technology, U.S.
House of Representatives ....................................................................................
Written Statement ............................................................................................
Statement by Representative Brad Miller, Ranking Minority Member, Subcommittee on Energy and Environment, Committee on Science, Space, and
Technology, U.S. House of Representatives .......................................................
10
11
12
14
Witnesses:
Dr. Michael Honeycutt, Chief Toxicologist, Texas Commission on Environmental Quality
Oral Statement .................................................................................................
Mr. Eugene Trisko, Attorney at Law, on Behalf of the American Coalition
for Clean Coal Electricity
Oral Statement .................................................................................................
Mr. Tom Wolf, Executive Director, Energy Council, Illinois Chamber of Commerce
Oral Statement .................................................................................................
Mr. David Hudgins, Director of Member and External Relations, Old Dominion Electric Cooperative
Oral Statement .................................................................................................
Mr. Richard Trzupek, Principal Consultant, Trinity Consultants
Oral Statement .................................................................................................
Discussion
16
19
53
55
75
77
81
83
88
90
98
Appendix 1: Answers to Post-Hearing Questions

Dr. Michael Honeycutt, Chief Toxicologist, Texas Commission on Environmental Quality .....................................................................................................
Mr. Eugene Trisko, Attorney at Law, on Behalf of the American Coalition
for Clean Coal Electricity ....................................................................................
Mr. Tom Wolf, Executive Director, Energy Council, Illinois Chamber of Commerce .....................................................................................................................
Mr. David Hudgins, Director of Member and External Relations, Old Dominion Electric Cooperative .......................................................................................
Mr. Richard Trzupek, Principal Consultant, Trinity Consultants ......................
(III)
110
119
126
128
133
IV
Page
Appendix 2: Additional Material for the Record

An Economic Impact Analysis of EPAs Mercury and Air Toxics Standards
Rule .......................................................................................................................
136
EPAS IMPACT ON JOBS

AND ENERGY AFFORDABILITY:
UNDERSTANDING THE REAL COSTS
AND BENEFITS OF ENVIRONMENTAL
REGULATIONS
WEDNESDAY, JUNE 6, 2012
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON ENERGY AND ENVIRONMENT,
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:15 p.m., in Room
2318 of the Rayburn House Office Building, Hon. Andy Harris
[Chairman of the Subcommittee] presiding.
(1)
2
RALPH M, HALL, TEXAS
CHA!RMAN
EDD!E BERNICE JOHNSON, TEXAS

RANKING MEM8ER
U.S. HOUSE OF REPRESENTATIVES
COMMITIEE ON SCIENCE, SPACE, AND TECHNOLOGY

2321 RAYBURN HOUSE OFFICE BUILDING
WASHINGTON, DC 20515-6301
1202) 225-6371
www.science.house.1.I 0V
Subcommittee on Energy & Environment

EPA's Impact on Jobs and Energy Affordability: Understanding the Real Costs
and Benefits ofEnvironmental Regulations
Wednesday, June 6, 2012
2:00 p.m. - 4:00 p.m.
2318 Rayburn House Office Buildiug
The Honorable Cass Suustein, Administrator, Office ofInformation and Regulatory

Affairs, Office of Management and Budget (invited)
Mr. Eugene Trisko, Attorney at Law, On behalf of the American Coalition for Clean Coal
Electricity
Mr. David Hndgins, Director of Member and External Relations, Old Dominion Electric
Cooperative
3
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
SUBCOMMITTEE ON ENERGY & ENVIRONMENT
HEARING CHARTER
and Benefits of Environmental Regulations
Wednesday, Jurie 6, 2012
2:00 p.m. - 4:00 p.m.
2318 Rayburn House Office Building
PURPOSE
On Wednesday, June 6, 2012, at 2:00 p.m. in Room 2318 of the Rayburn House Office Building,
the Subcommittee on Energy and the Environment of the Committee on Science, Space, and
Technology will hold a hearing titled, EPA's Impact on Jobs and Energy Affordability:
Understanding the Real Costs and Benefits of Environmental Regulations. The purpose of this
hearing is to examine the process used by the Office of Information and Regulatory Affairs
(OIRA) and the Environmental Protection Agency (EPA) in evaluating the costs and benefits of
federal environmental regulations, including the recently announced Carbon Pollution Standard
for New Power Plants. l
WITNESS LIST
The Honorable Cass Sunstein, Administrator, Office ofInformation and Regulatory

Affairs, Office of Management and Budget (invited)
Mr. Eugene Trisko, Attorney at Law, On behalf of the American Coalition for Clean Coal
Electricity
Mr. David Hudgins, Director of Member and External Relations, Old Dominion Electric
Cooperative
Background
The Office of Information and Regulatory Affairs (OIRA), established in the 1980 Paperwork
Reduction Act and located within the Office of Management and Budget (OMB), is responsible
for reviewing draft regulations and ensuring agency compliance with requirements in several
Executive Orders pertaining to the regulatory process.2 It is OIRA's responsibility to oversee and
coordinate the Administration's regulatory policies and ensure that agency reports, guidelines,
I
2
77 Federal Register 22392.

http;//www.whitehouse.gov/omb/inforeg administrator.
4
rules, testimony, and proposed legislation are consistent with Administration policy. 3 In this
capacity, OMB-OlRA commonly issues memoranda and guidance to agencies regarding the
implementation of regulatory policies, actions, and goals. In accordance with these requirements,
EPA and other agencies release Regulatory Impact Analyses (RIAs) that examine the costs and
benefits of individual, major regulations.
Overall Regulatory Burdens
President Obama's issuance of Executive Order (EO) 13563 on "Improving Regulation and
Regulatory Review" takes a number of steps aimed at improving the cost-effectiveness of
regulatory actions. Despite the principles affirmed in this EO, the number of major regulations
and their price tag has grown substantially. A March 2012 analysis by the Heritage Foundation
found significantly higher regulatory burdens compared to the historical pace, with 106 new
major federal regulations with more than $46 billion in costs having been adopted during the
Obama Administration.4 In the same time period, federal regulatory agencies have seen their
5
combined budgets grow 16 percent, and regulatory employment rise 13 percent.
Role of EPA Clean Air Act Regulations
EPA regulations are playing a greater role in the overall federal regulatory enterprise as
measured in rulemaking and overall costs and benefits. According to OIRA's Regulatory
Review Dashboard, (see Figure I) EPA has nearly twice as many regulatory actions currently
being reviewed than any other part of the federal government.
Figure I. OIRA's Regulatory Review Dashboard6
AGENCIES WITH THE HOST REGULATORY ACTIONS CURRENTLY UNDER
REVIEW
Agency
Total Pending Actions: 155
The White House, Office of Management and Budget, "Office of Management and Budget: Open Government,"
http://www.whitehouse.gov/omb/open.
4 James Gattuso and Diane Katz, "Red Tape Rising: Obama-Era Regulation at the Three-Year Mark," March 13,
2012, http://www .heritage.org/researchireports/20 12/03/red.tape-rising-obamaera-regu lation-at-the-three-yearmark.
.
5 John Merline, "Regulation Business, Jobs Booming Under Obama," Investor's Business Daily, August 15, 20 II.
6 http://www.reginfo.gov/public/.
3
5
In its Draft 2012 Report to Congress on the Benefits and Costs ofFederal Regulations and
Unfunded Mandates on State, Local, and Tribal Entities,? OIRA notes the prominence of EPA
Clean Air Act rules in the overall regulatory apparatus, disclosing that EPA rules represent 60 to
81 percent of the agency-estimated monetized benefits and 44 to 54 percent of the monetized
costs of all federal regulations.
The report further emphasizes that 97 to 98 percent of EPA's claimed benefits come from air
quality rules, and that "the large estimated benefits of EPA rules are mostly attributable to the
reduction in public exposure to a single air pollutant: fine particulate matter."g While footnoting
six major areas of uncertainty about EPA's assumptions about particulate matter (PM) and
premature mortality and stating that "further scientific work is important in this domain" and
"[m]ore research remains to be done on several key questions," OlRA continues to accept EPA's
particulate matter-related benefits claims to justify the costs of air quality regulations on PM as
well as other pollutants. The reliance on PM can also be seen in EPA's March 2011 report,
Benefits and Costs of the Clean Air Actfrom 1990 to 2020, which focused almost exclusively on
ambient PM reductions in claiming that the overall benefits of the Clean Air Act ($2 trillion)
outweighed overall costs ($65 billion) by a factor of 30 to 1.9 In the regulatory analysis
accom~anying the Agency's December 2011 Mercury and Air Toxics Standards for power
plants, 0 PM co-benefits represented over 99 percent of the overall benefits, rather than the air
toxics being regulated (see'Figure 2),u
Recent environmental regulatory analysis has also increasingly relied on the use of private (as
opposed to social) benefits, which allege private financial gain attributable to regulatory actions.
For example, in the RIA accompanying the final New Source Performance Standards for the oil
and natural gas sector in April of2012,12 the Agency claimed that requiring companies to capture
methane from drilling operations would lead to "revenue from additional natural gas recovery"
that "exceeds the costs" of compliance. Calling this practice "highly suspect," The Economist in
February of this year described the increasing influence of private benefits and PM co-benefits
for new federal rules:
7 http://www.whitehouse.gov/sites/defaultlfiles/omb/oira/draft 2012 cost benefit reporl.pdf.

'Ibid.
9 http://www.epa.gov/air/sectSI2/prospective2.html.
\0 77 Federal Register 9304.
II Testimony of Anne Smith, October 4, 2011,
http://science.house.gov/sites/republicans.science.house.gov/files/documents/hearings/ 100411 smith O.pdf.
12 www.epa.gov/airquality/oilandgas/pdfs/20120417finalrule.pdf.
6
Figure 2. The Role of PM Co-Benefits and Private Bt)nefits 13
Moving the goalposts

Soorce of monetary benefits of ot!'.... "eClUl()mkaU~l
$i9:nifl(;~nt'" federal Wl0S, */Qftotal
. . Private benefits of energy effidency
liliiii (o,ool1efits vi....dIKed fino partkl

_ All other beneHts
2007
08
09
10
In late March, EPA announced its proposed Carbon Pollution Standard for New Power Plants,
despite concerns that tlie regulation could effectively prevent the construction of new coal-fired
power plants, 14 While Executive Order 13563 requires that agencies "propose or adopt a
regulation only upon a reasoned determination that its benefits justifY its costs," EPA stated that
the rule "will result in negligible C02 emission changes, energy impacts, quantified benefits,
costs, and economic impacts by 2020.,,15
Executive Order 13563
President Obama issued EO 13563, "Improving Regulation and Regulatory Review," on January
18,2011. 16 EO 13563 outlined several imperatives for the federal government's regulatory
system while reiterating the principles, structures, and definitions governing regulatory review
established in Executive Orders issued in previous Administrations. The Obama Executive Order
stipulates that the regulatory system must protect public health, welfare, safety, and the
environment while promoting economic growth, innovation, and competitiveness. It requires the
system to be "based on the best available science," allow for public participation, promote
predictability, and reduce uncertainty. It must also identifY and use the most innovative and least
burdensome tools, take into account benefits and costs, and ensure regulations are accessible,
consistent, and easy to understand. Furthermore, the system must measure and seek to improve
the results of regulatory requirements.
EO 13563 reaffirms many of the requirements and principles established in the Clinton
Administration's Executive Order 12866; specifically that the benefits of regulatory actions must
13 The Economist, "The Rule of More: Rule-making is being made to look more beneficial under Barack Obama,"
February 18,2012, http://www.economist.com/nodel2I547772/print.
14 Robert Bryce, "Is There Still a Case for Coal?" Manhattan Institute Issues 2012, No. 13, May 2012,
http://www.manhattan.institute.orglhtml/irI3.htm.
15 http://epa.gov/carbonpollutionstandard/pdfs/20 120327proposaIRIA.pdf.
16 Executive Order 13563, "Improving Regulation and Regulatory Review," Issued by President Barack Obama,
January 18,2011, http://www.gpo.gov/fdsys!pkgIFR-2011-01-2I1pdf/2011-1385.pdf.
7
justify costs; regulations must be tailored to impose the least burden on society and take into
account the costs of cumulative regulations; selection of the regulatory approaches that maximize
net benefits; specification of performance objectives; and the identification and assessment of
available alternatives to direct regulation. However, President Obama's Order also permits
agencies to "consider (and discuss qualitatively) values that are difficult or impossible to
quantify, including equity, human dignity, fairness, and distributive impacts."
President Obama's Order also includes specific requirements for agencies regarding public
participation, integration and innovation, flexible approaches, the use of science, and
retrospective analyses of existing rules. The Order asks agencies to coordinate, simplify, and
harmonize their regulatory efforts to avoid overlap or redundancies, and identify approaches that
reduce burdens and maintain flexibility and freedom of choice for the public. Agencies are also
urged to come up with a method to conduct retrospective analyses of existing regulations in
order to identify any ineffective or excessively burdensome regulations and later streamline,
modify, expand, or repeal those identified. Additionally, each agency must "ensure the
objectivity of any scientific and technological information and processes used to support the
agencies regulatory action."
Cumulative Effects of Regulation
In response to Executive Order 13563 and recommendations on strengthening regulatory review
by the White House Jobs Council,17 OIRA AdministratorCass Sunstein distributed an OMB
Memorandum on March 20, 2012 with the subject "Cumulative Effects ofRegulations.,,18 The
letter identified key recommendations from the executive order, and outlined a list of steps that
agencies should consider in order to incorporate consideration of cumulative effects, reduce
"redundant, overlapping, and inconsistent requirements" and "identify opportunities to
harmonize and streamline multiple rules." Furthermore, the memorandum directed agencies,
where appropriate and feasible, to consider "cumulative effects and opportunities for regulatory
harmonization" and "carefully assess the appropriate content and timing of rules in light of those
effects and opportunities" in the rule analysis process.
The steps outlined in the guidance stipulated ways for agencies to implement and incorporate
recommendations, considerations, and principles outlined in the executive order. Issues
addressed by the steps included public comment and early engagement of stakeholders in the
rulemaking process; specific consideration of cumulative effects vis-a.-vis small businesses and
start-ups; identification of opportunities to increase net benefits while decreasing costs;
consideration of the relationship between proposed and existing regulations; identification of
opportunities to eliminate inconsistency and redundancy; coordination of timing, content, and
requirements of mUltiple rulemakings for a particular sector or industry; and incorporating
consideration ofthe interactive and cumulative effects of mUltiple regulations affecting specific
sectors as part of agencies retrospective analysis of existing rules.
Previous Guidance to Agency

Executive Order 12866
17
18
http://www.jobs-council.com/recommendations/summary-of.road-map.lo.renewal-report!.
http://www.whitehouse.gov/sites/defaultlfiles/omb/assels/inforeg/cumulative-effects-guidance.pdf.
8
In September of 1993, President Clinton issued Executive Order 12866, "Regulatory Planning
and Review.,,19 The order established a regulatory planning and review process whereby the
OMB generally, and OIRA specifically, was assigned responsibility for review of the agency
rulemaking process; furthermore, the Order designated OIRA as "the repository of expertise
regarding regulatory issues, including methodologies and procedures that affect more than one
agency ... " Pursuant to this characterization, the Order proceeded to assign substantial
responsibility to 0 IRA both with regards to the regulatory process in general and the
implementation of the Order specifically.
The stated intention of the order was to "reform and make more efficient the regulatory process"
and it established a regulatory philosophy and principles for agencies to incorporate or abide by
in order to achieve this end. Per the identified principles, agencies would be required, among
other things, to assess the costs and the benefits of intended regulations, and propose or adopt a
regulation "only upon a reasoned determination that the benefits of an intended regulation justify
its costs."zo The order also established the organization of the regulatory planning and review
process, and assigned OMB and OIRA responsibility for ensuring that agencies incorporated the
principles in the rulemaking process.
OMB Circular A-4
Circular A-4, issued by the Office of Management and Budget to the heads of executive agencies
and establishments on September 17,2003, provides guidance to Federal agencies on the
development of regulatory analysis and regulatory accounting statements as required by
Executive Order 12866 and the Regulatory Right-to Know ACt. 21 This circular served as a
replacement for OMB's 1996 "Best Practices" document and the subsequent guidance issued in
2000. Circular A-4 defines "good regulatory analysis" and also helps standardize the manner in
which the benefits and costs of Federal regulatory action are measured and reported. It also
incorporated and elaborated on the regulatory philosophy and principles outlined in Clinton's
order.
Per the circular, regulatory analyses should contain a statement of the need for the proposed
action, which would include an identification of the problems to be addressed and specific
authority to do so. An examination of alternative approaches based on several factors and
variables must also be undertaken, followed by an evaluation of benefits and costs, both
qualitative and quantitative, of the proposed action and identified alternatives. The circular
provides instructions for agencies on how to perform a cost-benefit analysis, identifyfng key
components and characteristics, such as establishment of a scope and baseline, evaluation of
alternatives, and the transparency and reproducibility of results. Furthermore, the circular
identifies opportunity cost as a key measure in estimating costs and benefits; OMB identifies
"willingness-to-pay," or what individuals are willing to forgo to enjoy a particular benefit, as the
most appropriate metric, although "willingness-to-accept," an individual's willingness to accept
httll:llwww.whitehouse.gov/sites/defaultlfiles/omb/inforegleoI2866.pdf.
This is a departure from a prior executive order, issued by President Reagan in 1981, which stipulated,
"Regulatory action shall not be undertaken unless the potential benefits to society for the regulation outweigh the
potential costs to society... the alternative involving the least net cost to society shall be chosen ... ".
Executive Order 12291, "Federal Regulation" issued by President Ronald Reagan. February 17, 1981. Accessible at:
http://www.archives.gov/federal-register/codificationlexecutive-order/I2291.html
21 The White House, Office of Management and Budget, "Circular A-4," September 17, 2003,
http://www.whitehouse.gov/omb/circulars a004 a-4/.
19
20
9
compensation, is also included as a possible measure in some circumstances. The circular directs
agencies to take into account ancillary benefits and countervailing risks in addition to simply
examining direct benefits and costs.
OMB Final Information Ouality Bulletin for Peer Review
The general authority granted to OMB allows the office to oversee the quality of agency
information, analyses, and regulatory action. Thus, as part of a larger effort to improve the
quality of scientific information upon which policy decisions are based, OMB issued its "Final
Information Quality Bulletin for Peer Review" in December of 2004. 22 This bulletin, applicable
to all departments and agencies, established "government-wide guidance aimed at enhancing the
practice of peer review of government science documents" in order to increase the quality and
credibility of scientific information generated by the federal government.
The guidance addressed several questions fundamental to the peer review process such as what
information is subject to peer review, the selection of appropriate reviewers, opportunities for
public participation in the process, and additionally defined a planning process that would allow
for dialogue between the agency, the public, and the scientific community. It also established
definitions and government wide standards concerning when peer review is required and what
type of peer review should be considered in various circumstances.
EPA's Guidelines for Preparing Economic Analvses
In order to meet the requirements of Executive Order 12866 and OMB Circular A-4, the
Environmental Protection Agency undertook internal efforts to develop a framework for
economic analyses that would both "inform the policy making process and satisfy OMB's
requirement for regulatory review." This process resulted in the agency's publication of
Guidelinesfor Preparing Economic Analyses,23 which established a scientific framework for
performing economic analyses of environmental regulations and policies.
The document provides guidance for conducting cost-benefit and economic impact analyses,
how to perform distributional analyses, and a review and explanation of discounting procedures
to be used in evaluating environmental regulatory actions. The guideline also attempts to ensure
that issues inherent in assessing benefits and costs, such as uncertainty, timing, and valuation, are
treated in a consistent manner in economic analysis throughout the Agency and across all
program offices.
http://www.whitehouse.gov/sites/defaultlfiles/omb/memorandalfy200SlmOS-03.pdf.
US Environmental Protection Agency, Office of the Administrator "Guidelines for Preparing Economic
Analyses," December 2010. Accessible at: bttp:/lyosemite.epa.gov/ee/epaleerm.nsflvwANIEE-OS6851.pdl7$fiIe1EE-0568-51.pdf
22
23
10
Chairman HARRIS. The Subcommittee on Energy and Environment will come to order.
Good afternoon. I am going to first apologize for a late start but
we just got off the Floor with our first series of votes today, and
I want to thank you all for your patience.
Welcome to todays hearing entitled EPAs Impact on Jobs and
Energy Affordability: Understanding the Real Costs and Benefits of
Environmental Regulations. In front of you are packets containing
the written testimony, biographies, and truth-in-testimony disclosure for todays panel of witnesses.
I now recognize myself for five minutes for an opening statement.
I want to welcome everyone to this afternoons hearing on EPAs
Impact on Jobs and Energy Affordability and to thank our witnesses for lending this Subcommittee their time and expertise.
At the outset, I want to note that, unfortunately, due to a personal conflict, we should congratulate Cass Sunstein on the birth
of a child. Administrator Sunstein from the White House Office of
Information and Regulatory Affairs will not be testifying today. I
certainly understand this explanation, although it was not communicated to the Subcommittee until late last week. I am concerned
and somewhat disappointed in the lack of transparency and responsiveness demonstrated by the Office of Information and Regulatory
Affairs when trying to organize this hearing.Staff reached out to
identify a mutually agreeable hearing date over two months ago,
and beginning on April 24, I sent formal invitations expressing
flexibility regarding the Offices appearance that remain unanswered.
I would be greatly disappointed if Administrator Sunstein refused to testify at some point before this Subcommittee, especially
in light of the fact that his predecessors have testified before the
Science Committee and its Subcommittee nearly a dozen times. An
unwillingness to discuss recent regulatory developments would be
especially disconcerting, given that Mr. Sunstein is responsible for
overseeing the Open Government Initiative for the Presidents selfproclaimed most transparent Administration in history.
Further, his office is charged with enforcing the Executive Order
requiring that the regulatory system be based on the best available science as well as OMB standards on information quality,
peer review, and data access. These are all issues directly relevant
to the Subcommittees jurisdiction and work, and I expect the Administrator to communicate to the Subcommittee by the end of this
week when it would be convenient for him to testify in the coming
months.
While OIRA is not represented to discuss this process of integrating scientific and economics assessments into regulatory decision making, there are numerous Executive Orders and OMB and
Agency guidelines for thorough regulatory analysis. Unfortunately,
many of these guidelines have been willfully ignored in order to
pursue an unprecedented regulatory agenda that is at odds with
the Presidents rhetoric about an all-of-the-above energy policy.
Our witnesses today will describe a pattern of scientific and economic practices at EPA and OIRA that inflates health-based regulatory benefits; overlooks actual economic, energy affordability, and
jobs impacts; and fails to reflect uncertainty in communicating
11
risks. All too often, major EPA regulations have been underpinned
by secret science, hidden data, and black box models. As demonstrated in the hydraulic fracturing cases in Pavillion, Wyoming,
Parker County, Texas, and Dimock, Pennsylvania, the Agency often
appears more concerned with crucifying press releases and enforcement actions than meaningful peer review or scientific analysis.
Additionally, EPA has failed to account for the health impacts of
the higher energy prices and joblessness that these regulations
guarantee. More and more of these regulations are almost exclusively justified on the basis of incidental co-benefits from particulate matter reductionsraising the specter of double-countingand
private benefits on the assumption that all regulated entities are
acting irrationally and against their economic self-interest and
theand that EPA knows what is best for their bottom line.
The absurdity of these estimates is demonstrated in OIRAs 2012
Draft Report to Congress, which indicates that, based on benefits
estimates generated by EPA, the Agencys air quality regulations
represent almost 80 percent of the benefits for all federal rules. Despite President Obamas Executive Order requiring that regulatory
benefits justify costs, EPA recently announced its Carbon Pollution
Standard for New Power Plants and claimed that the rule will result in negligible CO2 emission changes, energy impacts, quantified
benefits, costs, and economic impacts. As a matter of principle,
regulatory benefits should justify their costs, and EPAs pursuit of
this coal-killing regulation, despite its own admission that the rule
has negligible benefits is mind boggling. As several of our witnesses will testify, this statement strains credulity, and the proposal is a de facto ban on new, clean, coal-generated electricity in
this country, as well as directly at odds with the Presidents allof-the-above energy rhetoric.
I want to thank the witnesses for appearing before the Subcommittee today, and I look forward to a constructive discussion.
I yield back the balance of my time, and I recognize the Ranking
Member, Mr. Miller, for five minutes for an opening statement.
[The prepared statement of Mr. Harris follows:]
PREPARED STATEMENT
OF
SUBCOMMITTEE CHAIRMAN ANDY HARRIS
I want to welcome everyone to this afternoons hearing on EPAs Impact on Jobs

and Energy Affordability, and thank our witnesses for lending this Subcommittee
their time and expertise.
At the outset, I want to note that, unfortunately, due to a personal conflict, Administrator Cass Sunstein from the White House Office of Information and Regulatory Affairs, or OIRA, will not be testifying today. I certainly understand this explanation, although it was not communicated to the Subcommittee until late last
week. I am concerned and somewhat disappointed in the lack of transparency and
responsiveness demonstrated by OIRA when trying to organize this hearing. Staff
reached out to identify a mutually agreeable hearing date over two months ago, and
beginning on April 24 I sent formal invitations expressing flexibility regarding
OIRAs appearance that remain unanswered.
I would be greatly disappointed if Administrator Sunstein refused to testify before
this Subcommittee, especially in light of the fact that his predecessors have testified
before the Science Committee and its Subcommittees nearly a dozen times. An unwillingness to discuss recent regulatory developments would be especially disconcerting, given that Mr. Sunstein is responsible for overseeing the Open Government Initiative for the Presidents self-proclaimed most transparent Administration
in history. Further, his office is charged with enforcing the Executive Order requiring that the regulatory system be based on the best available science as well as
12
OMB standards on information quality, peer review, and data access. These are all
issues directly relevant to the Subcommittees jurisdiction and work, and I expect
the Administrator to communicate to the Subcommittee by the end of this week
when it would be convenient to testify in the coming months.
While OIRA is not represented to discuss this process of integrating scientific and
economics assessments into regulatory decision making, there are numerous Executive Orders and OMB and Agency guidelines for thorough regulatory analysis. Unfortunately, many of these guidelines have been willfully ignored in order to pursue
an unprecedented regulatory agenda that is at odds with the Presidents rhetoric
about an all-of-the-above energy policy.
Our witnesses today will describe a pattern of scientific and economic practices
at EPA and OIRA that inflates health-based regulatory benefits, overlooks actual
economic, energy affordability, and jobs impacts, and fails to reflect uncertainty in
communicating risks. All too often, major EPA regulations have been underpinned
by secret science, hidden data, and black box models. As demonstrated in the hydraulic fracturing cases in Pavillion, Wyoming, Parker County, Texas, and Dimock,
Pennsylvania, the Agency often appears more concerned with crucifying press releases and enforcement actions than meaningful peer review or scientific analysis.
Additionally, EPA has failed to account for the health impacts of the higher energy prices and joblessness that these regulations guarantee. More and more of
these regulations are almost exclusively justified on the basis of incidental co-benefits from particulate matter reductions (raising the specter of double counting) and
private benefits on the assumption that all regulated entities are acting irrationally
and against their economic self-interest (and that EPA knows what is best for their
bottom line).
The absurdity of these estimates is demonstrated in OIRAs 2012 Draft Report to
Congress, which indicates that, based upon benefits estimates generated by EPA,
the Agencys air quality regulations represent almost 80 percent of the benefits for
all federal rules. Despite President Obamas Executive Order requiring that regulatory benefits justify costs, EPA recently announced its Carbon Pollution Standard
for New Power Plants and claimed that the rule will result in negligible CO2 emission changes, energy impacts, quantified benefits, costs, and economic impacts. As
a matter of principle, regulatory benefits should justify their costs, and EPAs pursuit of this coal-killing regulation, despite its own admission that the rule has negligible benefits, is mind boggling. As several of our witnesses will testify, this statement strains credulity, and the proposal is a de facto ban on new, cleaner coal-generated electricity in this country as well as directly at odds with the Presidents allof-the-above energy rhetoric.
I want to thank the witnesses for appearing before the Subcommittee today and
I look forward to a constructive discussion.
I yield back my time.
Mr. MILLER. Thank you, Chairman Harris.

I also want to begin by congratulating OIRA Administrator Cass
Sunstein on the birth of a daughter last week. The human gestation period is somewhat predictable, and I suspect that Mr.
Sunstein has known for some time that his wife would give birth
about when she did. And that explains some of his reluctance to
agree to a date to testify from among the options that the majority
offered him. It is hard for me to imagine that he may not have
mentioned that as the reason until last week, but it is hard for me
to imagine he was keeping his wifes pregnancy secret. Pregnancy,
particularly in the later stages, tends to be a fairly transparent
event.
But todays hearing is one he probably would not mind missing.
This Committee certainly should inquire into the cost-benefit analysis of environmental regulations. I have been concerned about economic cost-benefit analysis for a long time. Placing a dollar value
on human life in deciding the economic benefit of environmental
regulations raises serious questions, both practical and moral.
Should we really value the lives of older Americans less than
younger Americans, as at least one of our witnesses today apparently favors? And in a letter to Administrator Sunstein last fall,
13
Chairman Harris asked, in spite of the fact that most mortality
associated with particulate matter happens in the population over
65 years of age, EPA puts the same value on mortality for all ages.
In your view, is this practice appropriate?
The Bush Administration briefly considered a senior death discount to justify weakening environmental regulations by valuing
the lives of Americans older than 70 at 37 percent less than the
values of the lives of other Americans. Their analysis reduced the
economic benefit of one air pollution regulation from $77 billion to
$8 billion. The Bush Administration recognized that they were
swimming in deep waters, however, and dropped the idea of a senior death discount in economic cost-benefit analysis. That seems
like the right decision to me.
But we know that as a practical matter if we forbid anything
that could result in someones death, then all economic activity will
grind to a halt. But putting a dollar value on lives and valuing the
lives of some more than others raises profound moral questions. I
admit that deep philosophical discussions make me feel like I am
back in college. I am in a dorm room late at night; three or four
of us have had a few beers. We are sure that we are considering
issues that have gone largely unexamined by previous generations
and that our insights are wise beyond our years, but it is certainly
better to talk about these questions out loud and let the American
people in on the discussion. They might not agree that old folks
lives should be discounted. In fact, they might decide that Congress
is really just more interested in pleasing special interests than in
protecting the health of our mothers and fathers. And any supposed philosophical justification or economic justification for what
Congress is doing is phony.
If that was what this hearing was about or even a discussion of
economic cost-benefit analysis that was a notch or two less abstract
or philosophical, the majority would have invited EPA to provide
a witness to explain how it would do cost-benefit analysis. So EPA,
it does cost-benefit analysis of environmental regulations, not
OIRA. Instead, this hearing is one more forum for big, specific industries to air their grievances about the EPA. We have heard
again and again over the last year and a half that the EPA is filled
with authoritarian zealots bent on destroying jobs, raising energy
costs, and otherwise making us all eat granola, wear sandals, and
ride bicycles. We have heard repeatedly that the EPA knows little
of scientific methods and even less of economic analysis often from
witnesses with few apparent credentials as scientists or economists.
Given the disjointed nature of the list of particular grievances
with the EPA aired today, the minority decided not to call a witness to todays hearing. If this Committee holds a hearing in the
future for a serious, focused discussion of cost-benefit analysis, the
communities affected by environmental exposures, and the practical and moral judgments that are behind the value of statistical
life, we will certainly invite a witness.
For today, I am submitting for the record letters and reports by
groups and experts with the experience and knowledge to contribute to a thoughtful discussion of cost-benefit analysis.
14
I yield back. And Mr. Chairman, I believe that you have been
provided alreadyor your staff has been provided already a list of
the lettersthe documents that we submit for the record.
[The prepared statement of Mr. Miller follows:]
PREPARED STATEMENT
OF
SUBCOMMITTEE RANKING MEMBER BRAD MILLER
Thank you, Chairman Harris.

I want to begin by congratulating OIRA Administrator Cass Sunstein on the birth
of a daughter last week. The human gestation period is somewhat predictable, and
I suspect that Mr. Sunstein has known for some time that his wife would give birth
about when she did, and that explains some of his reluctance to agree to a date to
testify from among the options that the majority offered.
But todays hearing is one he probably doesnt mind missing.
This Committee certainly should inquire into the cost-benefit analysis of environmental regulations. Ive been concerned about economic cost-benefit analysis for a
long time. Placing a dollar value on human life in deciding the economic benefit of
environmental regulations raises serious questions, both practical and moral.
Should we really value the lives of older Americans less than younger Americans,
as at least one of our witnesses apparently favors? And in a letter to Administrator
Sunstein last fall, Chairman Harris asked,In spite of the fact that most mortality
associated with [particulate matter] happens in the population over 65 years of age,
EPA puts the same value on mortality for all ages. In you view, is this practice appropriate?
The Bush Administration briefly considered a senior death discount to justify
weakening environmental regulation. By valuing the lives of Americans older than
70 at 37 percent less than the lives of other Americans, their analysis reduced the
economic benefit of one air pollution regulation from $77 billion to $8 billion.
The Bush Administration recognized that and dropped the idea of a senior death
discount in economic cost-benefit analysis. That still seems like the right decision
to me.
We know that as a practical matter, if we forbid anything that might result in
someones death, then all economic activity would grind to a halt. But putting a dollar value on lives, and valuing some lives more than others, raises profound moral
questions.
I admit that deep philosophic discussions make me feel like Im back in college,
Im in a dorm room late at night, three or four of us have had a few beers, and
were sure that were considering issues that have gone largely unexamined by previous generations and that our insights are wise beyond our years.
But its certainly better to talk about these questions out loud and let the American people in on the discussion. They might not agree that old folks lives should
be discounted. In fact, they might decide that Congress is really just more interested
in pleasing special interests than in protecting the health of our mothers and fathers, and any supposed philosophical justification for what Congress is doing is
phony.
Thats what the title of this hearing suggested we would discuss today.
If that was what this hearing was about, or even a discussion of economic costbenefit analysis that was a notch or two less abstract or philosophical, the majority
would have invited the EPA to provide a witness to explain how they do cost-benefit
analysis. Instead, this hearing is one more forum for specific big industries to air
their grievances about the EPA. Weve heard again and again that the EPA is filled
with authoritarian zealots bent on destroying jobs, raising energy costs, and otherwise making us all eat granola, grow beards, and ride bicycles. Weve heard repeatedly that the EPA really knows little of scientific methods and even less of economic
analysis, often from witnesses with few apparent credentials as scientists or economists.
Given the disjointed nature of the list of grievances with the EPA aired today,
the minority decided not to call a witness. If this Subcommittee holds a future hearing for a serious, focused discussion of cost-benefit analysis, the communities affected by environmental exposures, and the practical and moral questions that are
behind the Value of Statistical Life, we will certainly invite a witness. For today,
I am submitting for the record letters and reports by groups and experts with the
experience and knowledge to contribute to a thoughtful discusssion of cost-benefit
analysis.
I yield back.
15
Chairman HARRIS. Yes. The Chair appreciates the request, but
I have to reserve the right to object to inclusion of the items in the
record at this time as our staff simply has not had the time to adequately review the contents of the documents for relevance and appropriateness. As you know, we receivedor may not knowwe received most of the materials at 11:30 last night. And, you know,
Congress, we like to think is a 24/7 body, but 11:30 last night is
a little late. We received additional materials at 10 oclock this
morning. You know that we have been in session since then, and
they total 18 documents and 140 pages. And, you know, we read
fast, but we dont read that fast.
So it is quite possible that most, if not all, of these items will not
present a problem but we simply need additional time for review.
The Chair would remind and encourage all Members wishing to
submit extensive materials into the record to share those as far in
advance as possible to allow for reasonable review times so that we
can, you know, get them in the record under unanimous consent,
but I am afraid that wont be possible at this time.
Mr. MILLER. And, Mr. Chairman, given that, first of all, I would
like to have a chance to discuss these issues if you determine on
any basis that these should not be part of the record. I do not recall
any time that the minority has submitted documents for the record
and had that request denied, but I would reserve the right to object
to any documents that the majority wishes to enter into the record.
Chairman HARRIS. Sure. And if we send something over at 11:30
last night, I think youit would be totally, totally appropriate for
you toespecially 140 pages at 11:30 at night, it would be totally
appropriate for that to be a fact.
Let me justsince you mentioned a letter that I had written to
Mr. Sunstein, I look forward to discussing the issues about statistical lives, maybe with Administrator Sunstein, maybe with Ezekiel
Emanuel also, because the whole purpose of the letter was that, in
fact, Mr. Sunstein has said that we should use statistical life here
and has repeatedly called for conducting regulatory analysis. I actually asked, is it appropriate in an EPA study? So I agree with
you that that is something we should discuss in a very open forum.
Now, if there are Members who wish to submit additional opening statements, your statements will be added to the record at this
point.
At this time, I would like to introduce three of our witnesses, and
I will yield to Mrs. Biggert to introduce Mr. Wolf and Mr. Trzupek.
The first witness is Dr. Michael Honeycutt, the Chief Toxicologist
with the Texas Commission on Environmental Quality. Welcome
back. He has been employed by the TCEQ since 1996 and has managed a division of 14 toxicologists since 2003. His responsibilities
include overseeing health effects, reviews of air permit applications, overseeing the review of the results of ambient air monitoring projects, and overseeing the reviews of human health risk
assessments for hazardous waste sites.
Our next witness is Mr. Eugene Trisko, Attorney-at-Law, who is
testifying on behalf of the American Coalition for Clean Coal Electricity. For 10 years, Mr. Trisko served as an expert witness on
water utility cost of capital before the Public Utility Commissions
of Maryland, Virginia, and West Virginia. In 2000 and again in
16
2007, Mr. Trisko was appointed by the U.S. Department of State
to represent U.S. industry and labor in bilateral negotiations with
Canada on air pollution control.
Our fourth witness today will be Mr. David Hudgins, the Director of Member and External Relations at the Old Dominion Electric
Cooperative. Old Dominion is a generation and transmission cooperative that supplies the electricity needs of 12-member electric distribution cooperatives that serve over 500,000 customers in Virginia, Delaware, and Maryland, and I might add, the 1st Congressional District of Maryland as well. In his position, Mr. Hudgins
works with these member cooperatives and local, regional, and
state governmental agencies to identify and attract businesses to
locate in the predominantly rural areas served by these cooperatives.
I now yield to Mrs. Biggert to introduce our third witness, Mr.
Tom Wolf; and our fifth and final witness, Mr. Richard Trzupek.
Mrs. BIGGERT. Thank you, Mr. Chairman. It is my pleasure to be
here this afternoon to introduce both of these witnesses from my
home State of Illinois.
Mr. Wolf is the Executive Director of the Illinois Chamber of
Commerces Energy Council, where he advocates for the development of across-the-board energy sources. Prior to joining the Chamber, Mr. Wolf spent more than 20 years as a Public Affairs Executive and holds a bachelors degree from the University of Wisconsin
in Madison.
Mr. Trzupek has worked in the environmental industry for three
decades, starting as a stat tester and now acting as an Environmental Consultant to many businesses. He is the author of Air
Quality Permitting and Compliance Manual and Regulators Gone
Wild. I havent read that one yetbut how the EPA is ruining
Americas industryand holds a bachelors degree from Loyola
University in Chicago.
So I thank both of you for joining us and providing your insights
into these troubling EPA regulations. I look forward to hearing
your testimony.
Yield back, Mr. Chairman.
Chairman HARRIS. Thank you very much, Mrs. Biggert.
As our witnesses should know, spoken testimony is limited to
five minutes, each after which the Members of the Committee will
have five minutes each to ask questions.
I now recognize Dr. Michael Honeycutt to present his testimony.
STATEMENT OF DR. MICHAEL HONEYCUTT,
CHIEF TOXICOLOGIST,
TEXAS COMMISSION ON ENVIRONMENTAL QUALITY
Mr. HONEYCUTT. Good afternoon, Mr. Chairman and Members of

the Committee. I am Dr. Michael Honeycutt, Director of the Toxicology Division at the TCEQ. I have submitted more detailed written comments on the science behind EPAs cost-benefit analysis,
but I will touch on a couple of highlights right now.
The EPAs cost-benefit analysis is detailed in the Regulatory Impact Analysis for each significant rule. A number of Executive Orders address the requirement for and the goals of cost-benefit anal-
17
ysis. Under the Reagan Administration, the benefits for a proposed
rule had to outweigh the cost for that rule. However, the Clinton
Administration in thisthe language was changed substantially
such that the benefits must simply justify the cost. That position
is maintained in the current administration, along with consideration for additional factors such as equity, fairness, promotion of
economic growth, and job creation.
The vast majority of the benefits that EPA calculates come from
the so-called co-benefits of reducing fine particulate matter, or
PM, even on the rules that do not directly target PM. Those estimated benefits rely heavily on two key assumptions: number one,
that PM causes mortality; and that, number two, that there is no
safe level of exposure to PM. The most recent analysis of the costs
and benefits of the Clean Air Act concludes that for every $1 society spends complying with these regulations, $30 in benefits is obtained. However, more objective assessments of the human health
benefits from cleaner air do not necessarily support the conclusion
that the benefits outweigh costs.
Keeping that in mind, I want to briefly talk about the ecological
epidemiology studies that EPA is using as the primary basis for the
PM benefits. These studies are exploratory studies designed to look
for correlations. They are supposed to be followed up by more rigorous epidemiology and clinical studies to determine whether the
correlations are real. These studies are not supposed to be used
quantitatively, and they are certainly not rigorous enough to set
environmental policy. The assumption is that breathing PM made
individuals die sooner than they would have otherwise.
This type of study is notorious for unresolved issues. Were the
individuals actually outside? Did they take their medications that
day? Do they have other risk factors with a stronger influence on
life expectancy like smoking, cholesterol levels or obesity? There
are a whole host of common-sense questions that go unanswered in
these studies. Simply put, these studies cannot tell us if PM caused
these deaths or even if these people died prematurely, much less
tell us what PM might have caused their death.
Since 2009, the EPA has assumed that there is a linear relationship between PM exposure and mortality. And you can see on the
overhead here, data from a typical study showing that the relationship between mortality risk and PM levels is not obvious. That is
not a straight line. I am sorry. In fact, one would be hard pressed
to detect a linear association. Nevertheless, statisticians can run
data through elegant models to try to find statistically significant
correlations, but the output of those models is only as good as the
input and, as any scientist will tell you, statistical correlation alone
does not imply causation.
EPA also assumes that any exposure to PM, no matter how low,
directly causes premature death. This method extrapolates risk far
below the NAAQS, extending to background levels. This approach
is not entirely accurate, nor is it conclusively supported by the
data. In fact, ecological epidemiology studies are not designed to
detect thresholds. Furthermore, this assumption does not take into
account the fact that the body can handle small doses of PM, and
indeed, this concept is the cornerstone of toxicology.
18
When the scientific data addressing the association between PM
and premature death is examined in detail, it becomes obvious that
these statistical associations may have very little biological significance. The increased chance of dying that is reportedly due to PM
exposure is extremely small. This chance is communicated by what
is known as relative risk, with a relative risk of 1.0 being not significant. Scientific as well as legal guidance indicates that relative
risks below 2.0 should not be considered to support this relationship. The relative risks for PM and premature death reported to
date are considerably lower than 2.0.
For the two studies EPA uses, one relative risk is 1.06 and the
other is 1.16. Some of the studies show no relationship, and in fact,
some studies suggest that PM can make you live longer.
These issues illustrate EPAs modus operandi. The concept of
weight of evidence is misused to discount contradictory data.
They use worst-case assumptions, fail to put risks into proper perspective, and fail to disclose how uncertain the data are. Our agency believes that regulations are an integral and necessary tool to
protect public health and our natural resources. Likewise, our expectation is that those regulations be based on sound science and
justifiable and that they realize true benefits.
Thank you for this opportunity.
[The prepared statement of Mr. Honeycutt follows:]
19
Testimony of Dr. Michael Honeycutt, TCEQ
One Page Summary of Main Points
BackgroundjPurposeofRIAs
EPA uses the reduction of PM 2 .S in its Regulatory Impact Analyses (RIA) for rulemaking under
the Clean Air Act to show that the benefits of the regulations justify the costs.
1. Under the Reagan administration, the benefits of proposed rules were required to
outweigh the costs. However, recent executive orders under the Clinton and Obama
administrations require the benefits of regulatory action to justify the costs.
2. EPA uses the reductions of PM 2 .S in its Regulatory Impact Analyses (RIA) for
rulemaking under the Clean Air Act.
a. Reductions of PM 2.S are used even when regulations are not related to PM2 .S
exposure because these reductions are expected to occur coincidentally due to
the use of control technologies required by the proposed rule.
Changes in PM2 . 5 methodology

Changes in the methodology used to measure the benefits from reducing PM . s are not based
on sound science and have resulted in an increase in deaths attributed to PM . s, despite
improved air quality, resulting in inflated benefits.
3. EPA recently changed the methodology used to measure the benefits from reducing
PM2 .S. These changes include:
a. A "no threshold model" inaccurately assumes incremental benefits in lower
levels of PM2.S down to background levels.
b. Risks are incorrectly attributed to very low levels of ambient PM2 .S .
c. A causal relationship between PM2 .S and mortality is assumed by only using
data that supports the conclusion that PM 2 .5 exposure causes premature
mortality. EPA ignored well-conducted studies that contradict their findings.
The studies EPA used to say a causal relationship exists cannot be used for this
purpose.
d. Inappropriate use of a Value of Statistical Life (VSL) creates an inaccurate
projection oflives "saved."
4. EPA's changes to the PM 2 S methodology resulted in an increase in deaths attributed to
PM2.S, despite improved air quality.
a. This methodology together with the inappropriate use ofVSL has resulted in
inflated benefits of reducing PM2.5 and creates the illusion of Clean Air Act
benefits that vastly outweigh the costs of rule implementation.
Inflated benefit!cost ratio

EPA claims that the benefits of reducing PM2 .S outweigh the costs by 30 to 1. However,
alternative assessments of the human health benefits from cleaner air do not necessarily
support the conclusion that benefits outweigh costs.
5. Using flawed methodology, EPA claims that the benefits outweigh ilie costs by 36 to 1.
a. By correcting Q.!l)x the inaccurate use ofVSL, it can be determined that the
benefit:cost ratio is 5:1. Objective analysis indicates that the benefit:cost ratio is
actually 0.3:1.
6. This trend amounts to censoring the information being communicated to the risk
manager.
a. The same statistical "lives" are counted in multiple rules, resulting in a double
counting of benefits.
b. Costs are unique to each rule.
20
Good morning, Mr. Chainnan and members of the committee. I am Dr. Michael Honeycutt,
director ofthe Toxicology Division at the Texas Commission on Environmental Quality. I have
submitted more detailed written comments on the science behind the EPA's cost benefit
analyses, but I'll touch on a couple of highlights now.
The EPA's cost benefit analysis is detailed in the Regulatory Impact Analysis (RIA) for each
significant rule!. A number of Executive Orders address the requirement for and goals of cost
benefit analysis. Under the Reagan administration2 the benefits for a proposed rule had to
outweigh the costs for that rule. However, with the Clinton administration3 this language was
changed substantially such that the benefits must simply justifY the costs. That position is
maintained in the current administration 4 along with consideration for additional factors such as
equity, fairness, promotion of economic growth, and job creation.
The vast majority of the benefits that EPA calculates5 come from the so-called "co-benefits" of
reducing fine particulate matter6, or PM, even on rules that do not directly target PM. Those
estimated benefits rely heavily on two key assumptions: I) that PM causes mortality and 2) that
there is no safe level of exposure to PM. The most recent analysis 7 of the costs and benefits of
the Clean Air Act concludes that for every $1 society spends complying with these regulations,
$30 in benefits is obtained. However, more objective assessments of the human health benefits
from cleaner air do not necessarily support the conclusion that benefits outweigh costs 8
Keeping that in mind, I want to briefly talk about the ecological epidemiology studies that EPA
is using as the primary basis for the PM benefits. These studies are exploratory studies designed
to look for correlations. They are supposed to be followed up by more rigorous epidemiology
and clinical studies to detennine whether the correlations are real. These studies are not supposed
to be used quantitatively and they certainly are not rigorous enough to set environmental policy.
The assumption is that breathing PM made individuals die earlier than they would have
otherwise. This type of study is notorious for unresolved issues: Were the individuals actually
outside in the days prior to their death? Did they take their medications that day? Do they have
other risk factors with stronger influence on life expectancy (like smoking, cholesterol, or
weight)? There are a whole host of common sense questions that go unanswered in these studies.
Simply put, these studies cannot tell us if PM caused these deaths or even if these people died
prematurely, much less tell us what level of PM might have caused their death.
Since 2009, the EPA has assumed that there is linear relationship between PM exposure and
mortality. You can see here (figure 1) data from a typical study showing that the relationship
1 OMB Circular A-4: A regulatory action is economically significant ifit is anticipated(l) to "(h]ave an annual
effect on the economy of$100 million or more" or (2) to "adversely affect in a material way the economy, a sector
ofth. economy, productivity, competition,jobs, the environment, public health Or safety, or State, local, or tribal
governments or comrnunHies."
.
2 EO 12291, 1981
3 EO 12866, 1993
4 EO 13563,2011
5 EPA, March 2011. "The Benefits and Costs of the Clean Air Act from 1990 to 2020"
PM,.,
'EPA, March 2011. "The Benefits and Costs of the Clean Air Act from 1990 to 2020"
8 Tony Cox. 2012. Reassessing the human health benefits from cleaner air. Risk Analysis. 32(5):816-29.
21
between mortality risk and PM levels is not obvious. In fact, one would be hard pressed to detect
a linear association. Nevertheless, statisticians can run data through elegant models to try to find
statistically significant correlations, but the output of those models is only as good as the input
and, as any scientist will tell you, statistical correlation alone does not imply causation.
EPA also assumes that any exposure to PM, no matter how low, directly causes premature death.
This method extrapolates risk far below the NAAQS, extending to background levels. This "nothreshold" agproach is not entirely accurate, nor is it conclusively supported by the
data9,1O,1l,12, 3,14.15,16,17. In fact, ecological epidemiology studies are not designed to detect
thresholds. Furthermore, this assumption doesn't take into account the fact that the body can
handle small doses of PM. Indeed, this concept is the cornerstone of toxicology.
When the scientific data addressing the association between PM and premature death is
examined in detail, it becomes obvious that these statistical associations may have very little
biological significance. The increased chance of dying that is reportedly due to PM exposure is
extremely small. This chance is communicated as relative risk, with a relative risk of 1.0 being
non-significant. Scientific as well as legal guidance indicates that relative risks below 2.0 should
not be considered to support a hypothesized relationship l8. The relative risks for PM and
premature death reported to date are considerably lower than 2.0. For the two studies most often
cited by the EPA, the relative risks are 1.06 (pope et al. 2002 19) and 1.16 (Laden et al. 20062
Many of these studies do not show a statistical relationship between PM and premature death I.
1,
McDonnell WF, N Nishino-Ishikawa; FF Petersen, LH Chen, DE Abbey. 2002. Relationships of mortality with the
fine and coarse fractions of long-tenn ambient PM 10 concentrations in nonsmokers. Journal of Exposure Analysis
and Environmental Epidemiology. 10(5):427-36.

.
10 Koop GM and LA Tole. 2004. An investigation of thresholds in air pollution-mortality effects. Environmental
Modeling and Software. 21(12):1662-1673.
11 Enstrom IE. 2005. Fine particle air pollution and total mortality amOlig elderly Californians, 1973-2002.
Inhalation Toxicology. 17{I4):803-16.
I' Lipfert FW, JD Baty, JP Miller, RE Wyzga. 2006. PM,s constituents and related air quality variables as
r,redictors of survival in a cohort of U.S. military veterans. Inhalation Toxicology. 18:643-657.
3 Franklin M, A Zeka; J Schwartz. 2007. Association between PM,., and all-cause and specific-cause mortality in
27 U.S. communities. Journal of Exposure Science and Environmental Epidemiology. 17(3):279-87. see lag 0 data
14 Zeger SL, F Dominici, A McDermott, JM Samet. 2008. Mortality in the Medicare population and chronic
exposure to fine particulate air pollution in urban centers (2000-2005). Environmental Health Perspectives.
116(12):1614-9. see dataJor Western US.
Krewski D, M Jerrett, RT Burnett, R Ma, E Hughes, Y Shi, MC Turner, CA Pope 3,d, G Thurston, EE Calle, MJ
ThUD, B Beckerman, P DeLuca; N Finkelstein, K Ito, DK Moore, KB Newbold, T Ramsay, Z Ross, H Shin, B
Tempalski. 2009. Extended follow-up and spatial analysis of the American Cancer Society study linking particulate
air pollution and mortality. Research Report from the Health Effects Institute. 140:5-114. see 1972-2000 data
16 Klemm RJ, EL Thomas, RE Wyzga. 2011. The impact of frequency and duration of air quality monitoring:
Atlanta, GA, data modeling of air pollution and mortality. 61:1281-1291.
l7Tony Cox. 2011. Honnesis for fine particulate matter (PM,.. Dose-Response. Pre-Press Article.
18 Federal Judicial Center Reference Manual on Scientific Evidence Second Edition (2000) p384 & frt.l40.
19 Pope CA Ill, RT Burnett, MJ Thun, EE Calle, D Krewski, K Ito, and GD Thurston. 2002. Lung cancer,
cardiopulmonary mortality, and long-term exposure to fine particulate air pollution. Journal of the American
Medical Association. 287:1132-1141.
20 Laden F, J Schwartz, FE Speizer and DW Dockery. 2006. Reduction in fine particulate air pollution and mortality.
American Journal of Respiratory and Critical Care medicine. 173:667-672.
21 See references 9-17 above.
IS
22
Some studies even suggest PM makes you live longer22 ,23. EPA could have chosen a number of
studies just as well conducted as the Pope and Laden studies and would have determined there is
no health benefit from further regulating PM.
These issues illustrate EPA's modus operandi. The concept of "weight of evidence" is misused
to discount contradictory data. They use worst-case, often unrealistic assumptions, fail to put
risks into proper perspective, and fail to disclose how uncertain the data and therefore the
conclusions are. They extrapolate their risk assumptions to generate numbers of lives "saved"
which unnecessarily alarms the public, and backs policy makers into a comer so that questioning
the basis for EPA actions creates the illusion that you don't care about public health. Indeed
these regulations can have negative unintended consequences. Our agency believes regulations to
be an integral and necessary tool to protect public health and our natural resources. Likewise,
our expectation is that those regulations be based on sound science, be justifiable, and that they
realize true benefits.
Thank you for the opportunity to give this testimony.
NAAQS
N
Figure 1. Reported
correlation between
mortality risk and
average annual PM2.5
in Eftim et al. 2008.
Adjusted mortality
relative risk estimates
for Medicare
enrollees are plotted
against average PM2.5
for the 110 American
Cancer Society Study
counties.
<>
<>
.:.:
II)
<>
ii:
>;t:
iii
1::
<>
<>
<Xl
::!:
to
0
ro
Average Annual PM Z.5
Eftimet al. Epidemiology. 2008 Mar;19(2):20916.
22 See Franklin ef a/. 2007 data for Birmingham, Cincinnati, Dallas, Houston, Las Vegas, Los Angeles, and
Riverside.
23 Tony Cox. 2011. Honnesis for fine particulate matter (PM2.,). Dose-Response. Pre~Press Article.
"n,BigU'fi'i.iti'V',?N,'itMJi:'t.ii-lit.",.
II
EPA's Benefit Cost Analysis

23
Susana Hildebrand, P.E., Chief Engineer

Michael Honeycutt, Ph.D.
Stephanie Shirley, Ph.D.
CAAA Benefic Cost Analysis
TCEQ Chief Engineer's Office
May 17, 2012 {;,
Page 1
. . Texas Commission on Environmental Quality
Mission Statement:
The Texas Commission on Environmental Quality strives to protect our
state's human and natural resources consistent with sustainable
economic development. Our goal is clean air, clean water, and the safe
management of waste.
24
The TCEQ regularly weighs matters that affect the environment and
economy. Our goal is sensible regulation that addresses real
environmental risks, while being based on sound science and
compliance with state and federal statutes. In every case where Texas
disagrees with EPA's action, it is because EPA's action is not consistent
with these principles.
CAAA Benefit Cost Analysis. TCEQ Chief Engineer's Office
May 17, 2012
Page 2
,.
Background
March 2011 - EPA published "Benefits and Costs of the
Clean Air Act from 1990 to 2020 (Second Prospective
Study)"
- Benefits ($2T) outweigh costs ($65B) by 30 to 1
CAAA Benefit Cost Analysis
TCEQ Chief Engineer's Office May 17, 2012
Page 3
25
TCEQ staff examined this analysis, focusing on:

The studies used
The assumptions made
The methods employed
"
Regulatory Impact Analyses
President requires RIAs (Regulatory Impact Analyses) from

all agencies proposing significant regulations
- (OMB circular A4, 09/2003)
RIAs are NOT subject to peer or public review
May 17, 2012
Page 4
26
RIA should help determine if the benefits of an action are

likely and justify the costs or discover which of various
possible alternatives would be the most cost-effective
Key legislation - Executive Orders

E012291 - Reagan, 1981
- "Regulatory action shall not be undertaken unless the
potential benefits to society for the regulation outweigh the
potential costs to society ... the alternative involving the least
net cost to society shall be chosenff
E012866 - Clinton, 1993

27
Key change: benefits must justify the costs
E013563 - Obama, 2011

-
Benefits must justify the costs

New: equity, human dignity, fairness and distributive
impacts are required to be considered
- "Our regulatory system must protect public health, welfare,
safety, and our environment while promoting economic
growth, innovation, competitiveness, and job creation ff
May 17, 2012
Page 5
Use of PM 2 . S in RIAs
T3bt.!.
~lUU.marr o:lDap'H otRtli::lAH
NOlI-P~[U R\\Iemamp
oa PUwRwtM Co~Boufin iD. RL\s &iac. 1997 forM:ajor
ualkl' tile C~\
~ wuh no q'lWltifitd 'bcefito Jt:dl;ue not m this able. Wharf: I'mie 'Ofbeufit md/ot co:;r e~timaz
:u. prcn-ided.. peNSta~ VI b.utd onupptf bwud'llfboth 'the Oeufih aJ:oQ eost t.:otmwc. ~~
uml.J the. ~. dizeOlmt ratt~ u.: 1MCl iA:all ~:o.)
EPA uses estimates of

benefits from reducing
PM 25 in its RIAs for
rule'makings under the
Clean Air Act
Year
RlAa for Rules NOT Based on Leoal Authority

to Reoulate Ambient PM
1991 I O;oM !olAAQS (.11 uii... ~.os 3hr)
PMuCo-
PMl.ICoBenefit,Are
BonefitslAre
>50%01
T<)U,I
Only
Benefits
Qu:otntfflod
rmT~NESHAP
1995INOxSIPC~.i: Section 126P~
This is called "co-benefits"

because a PM 25 reduction
is expected from efforts to
reduce other air pollutants
19991 RtIiOiiilH:w:Rule
f9!fl Finll Sertwu 126 htitiOn"Rl:11e"
10041
StaIiolwyRecipnx:atia,~C~En,me
tndu:;trU1 Boiltr.; &; P'IO~e;;-Hu.tm-NESHAP
28
Clear. Air Mm:ury Rule

Cla;mAirVi.z&'bilit)'
AltT~
Sbtlonary Compft~.aOlllpstioc. :b:wm.W. CombunioXl.
iClo7lca=ololHAP ErommobUe ~u
Tren~
towards using PM 2 . 5
as primary source of
benefits in most RIAs
since 1997
20081 OmeNUQS (.o8shi;;;:-075 Shr)
2009
2CiOSTiM4l(1'bTNAAQS
Change in
Methodology
10091 NewMuW..C~'n..JIU~c:'101Pti'
1OfOTR.i:I~biiimifCQ~-~-~mSHAP
~EPA.lNHTSA loimlilbt-Dity GHG &:
c..ua,'
.wfOTSO.:!N'AAQslt=hr. 75 ppb)
Even when regulation is

not intended to protect
public health from
exposures to ambient
PM 2 . 5
~Exi=rSutiozwycompai_-~~
ZOITT~tNlComm.Ul.d~owJ.~NESH.AP-
:>
99.9'10
~lIii:lu:.'l, Comm't Dd~ti.t\UtOlUfBc~& Ptt.C~

20ITTC-.t&hulu~'l
SoliiWi::ie-Imi-UAit. NSPS-&
10111 CcmtrolofGHGftomM.aium& HN\)'-Outy
:!oTfTO.:iOie-Lc.omidm.tlca:NAA"QS
ZOTITti'illity BWer MACf NESHAP a:ii:lafR.Ul~)
">9904
10ul M~C.nChlcrA!bliPlwMm:my~oa:.
~6ifTs.w:tpS1Ud.p"incir.ml'k.ntimeNSPs ~lo=i(iUIFmo~;:PiYidiictLczlm:s:HAP-.AiiUi~
Page 6
From Smith, 2012

testimony
Key Changes in PM 2 s Methodology

The Benefits and Costs of the Clean Air Act from
1990 to 2020 (March 2011)
A no-threshold model for PM 2 . 5 that calculates
incremental benefits down to the lowest modeled air
quality levels
2.
Risks attributed to very low (background) levels of

ambient PM 2.5
3.
Assumption of causal relationship between PM 2.5 and

mortality
4.
A Value of Statistical Life (VSL)

CAAA Benefit Cost Analysis. TCEQ Chief Engineer's Office. May 17, 2012.
Page 7
29
1.
1. No Threshold Model
Annual
NAAQS
level
'"
I!
30'
0010<>
'"
0:
;.
a;
t
'>
0<)0
.~
::;:
: ;(,<>0
.:.:
'Q)OQ (19
$,
0 0
00
o,:~:J1
0 <>
-0)
oJ:o:o<>o
<"
00
00
0; 0
Statistically fitted
concentration-response
function
h~O
'"
<>
<)
30
A no-threshold model
for PM 2 .5 that calculates
incremental benefits
down to the lowest
modeled air quality
levels
!
oj
I
""<>
10
15
20
25
Average Annual PM2.5 Eftim et aJ. 2008
May 17, 2012.
Page 10
Adapted from
Smith 2011
Annual
NMQS
level
A no-threshold model
for PM 2 .5 that calculates
down to the lowest
modeled air quality
levels
~
Q
function
"'en"
iE
o
:;::
31
~
"'
'"
'"<:>
w
Average Annual PM 2.5 Eftim et al. 2008
below lowest measured levels
CAAA Benefit Cost Analvsis
May 17, 2012"
Page 11
Adapted from
Smith 2011
Annual
NAAQS
level
A no-th~eshold model
for PM 2 . 5 that calculates
down to the lowest
modeled air quality
levels
function
-'"
,!Q
0::
o
:2
1. Question: what is the shape

of the curve in the low-dose
range?
32
'"
0
<;0
"'o
10
2. Question: is there significant

risk associated with ambient
PM 2.s levels?
0:
15
20
2S
Average Annual PM z,5 Eftim et aL 2008
below lowest measured levels
TCEQ Chief Engineer's Office May 17, 2012.
Page 12
Adapted from
Smith 2011
II
Clinical Exposure Studies Conducted by EPA

116/2010
>M'"
"91"'''
"..58
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12:ll
441.49
NpdlnlcaleIlUUrequ!r!ncfQlIow>upob$eNed
U'"
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Nod!nl ... Ieffct;ur~QWt""loU_.... pcllo...-v'"
3/23/2010
4/13/lCllO
OMCU;tS
<4120/20.10
0"""
<m_
January 2010 - June 2011
NQdlnlr;aleflect"equlllil,fullaw.upoh:l'fflI
13;1')
U:1l0
Sf"""
S{11/11J10
""W
OMCG31
W}lOlO
0",,,,,
1(1;49
1113/2010
NO~InIQ\~ff~'tqulr1nsf~QbuMd
No dlmca!efftcU.reqo.,lrinilgjl<.nlMlpolm!M\d
13:2!l
"
XCU24
",.u
...."
121.36
follow-llpQbnlYll<l
Nnclinlaleff.etuequ;,m,rellcw-\ISIotn~
NodinleJl!ffto~.eq\lilllllfo!lcw-uplJlefved
HodlnluleffecUrequlf""!'Qlle"""p~
nc;,dl"lulirlh!<Ure<JI'I'irlifG!l<>w-upob~
41.1.98
Ngdl"ItaIeffe:!Zfi!ctulrinlfoll4w-up~
231.~n
$,125/2010
Nadi~ l!ffe.dS(l'iII~irkia
1.;1,11.1
",.,
S/ll/101O
Nodlnlc1lldfectste>:<""""roll __ up~
Nodi1l.c;a!!Ift!d:l;ntju/tlllIfollow-Wl~d
33
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9f.l120t0
174.61
9/21/10l!l
No(1\tllt;llelfet!$requ'r\nlfgllo""'W~1t
N<ldlnlgleff<=d5rtq~Irlna:IbIlow-<J9gbaetvelt
la/6/zalO
1 individual: elevated heart rate

1 individual: irregular heart beat*
39 individuals: no clinical effects
Nlldinlc.leffetu.reqtllrtna:fCJ!l<Jw'1lPob!<liNtd
NQdtnl'Jleffl'lUSleqlll"",foj~p~
I/lO/lOUJ
Results:
N!ld!nk.al~t~rIl>!fuIlOW>\lJ)obieNeli
Nodln!e.ldftcu'tq\Jlrln&fo!Iow.o.,pobltMld
'M""
G/1Sjl()10
7/l5/ZOlIJ
Dose:35 - 750 ug/m3
"."
,,,.,.
32O,1S
6{8/1PJtJ
41 Volunteers
U:OO
4(28/2010
S/4/1(Jl0
Nod"oniQlefftltUrllluJrln,fIIIIow.IIjloIufI"'~
9:34
10;52
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lI.em"'edf'omdl,mwlt~etonewOl'lSttot~trtlJlflbllllltfOl'l.lmllY!~,~tono)rmlllinUlrh\'thtn
~pprQXlm~telytwoho;rur,;t;ater.lndividu"w~ idmltte~
to tllehopihl ~(fQrcbaNlllon;mll
teiemmy. ~ltdJn(jhl<>tt.1., ZOUCtle Report. Enl'lfl)l'l lleal\hPll'nllIKt6ol:lQ.l1U/omp.llll3ll11
lO!1lZ0U'i
Noclmil:ale!fectlttqUlrirla~oble"'ed
1lJ1B/20l0
UJUlOIO
XCt;2l1
l/Ii/1Oll
l/Un011
"''''
1/31/2011
X234
''''
"''''
2j31l1lU
J((U36
57.!l1
u.C5
!l(J.9$
ND~IInICillefftKtsrequlr1n&~obS\!"'.d
Noo;UnJcII~"!'I"lrinlfollow.vpobRrvtd
No(I;nlgleff~ct$re/ll1lrtnsft.lll\>w-l.!pob_d
Nor;llnlcilleffecu~ncfullOW-UIIQbieroitd
Nodlllltaiefftwrequlrl!l${QI!Qw.u!,~~
Jl:etI\O'iedfi'Qffid>am!ltr~t<>;r;shOftf!pllQdttQt;u'lellW;1tedlle;trtr;r;"'dllli"'I'IICfIOI .... ~.Tha'nd"IV~
lI_d lillY $'flIlfIUIII\I. '11m; indIvId~iIIl WM ptOYlIII!d willi ~otl~. lIE \1Ie Kli 1m! hDlW retenlJna MId
66.l6
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tfoe/II\lalIeffed:!"eqult1ns follow-lIpo/);elVed
4/14/2011
NodlllltlleffutJ~uit\ngfoll_UPQ"et\l1:It
loIc>dinlealeffed;$lequlrmsl'ollf>W.1lj>4IuelW!d
4/18/2011
4fJSflOll
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5/2/ltlll
NodilliQleffec:\:$nq\lll1!18fcll_up~_6
Sfj6/2nll
Case Report: Supraventrtcular Arrhythmia after

Exposure to Concentrated Ambient Air Pollution
Particles. Ghio et al. EHP. Feb. 2012. 120:275-277
raferredloMD.
2/2412011
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"',..,
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NotlltU~eHetbr~'lUlfllllfoltow-~Pab_d
in.sa
Nodlnltille~rl/ClUlrJII,follov;.... pobst:f'.ed
Nod!!'llgldfedliretj\lllio,foH-""P4bsm<i!d
Note, <:tlnltiol Effem Is defined ~I requiring ",",~.I follow",!, <It roknil to P~V$ld""
Page 13
II
2. Risk Attributed to Ambient PM2.S

=99% of the estimated mortality is due to concentrations less
than the level deemed protective of public health
!v0"4
:90%
~
.c
::
..,
i...
$1)%
10%
."
OJ
."
,.
34
'0
..
.!
~ 50%
J!!
c
~
40<'~';'
"
l>.
.~
~
:;
E
"
10%
75
10
12
13
Sa llne annual mean PM", level <lAg!m')

Orthe total PM....elated deaths avoided:
n%occuramongpopulatlonexpo.edto PM levels at or above che LMLofche Pope etal, study.
I 1% occur among population exposed to PM levels acor aboveche LMLofchel.~cl(,,, ,,':' ell. study.
May 17, 2012
Page 14
20
..
Extrapolation of Mortality Estimates

Figul'e C-2. Distlibution of PM2.5 Mortality Risk in 2005
35
Percentage of total deaths due to PM2.S

0.85%",2.6%
2.3% to 3.9%
4%<o5.!%
5.2% to 6.1%
6.1% to '1%
Counties at or above the: median risk ~ in 200S
From EPA - Regulatory Impact Analysis of the Proposed
Toxics Rule: Final Report - March 2011
May 17, 2012
Page 17
"
4. Value of Statistical Life

Definition
A Value of Statistical Life (VSL)
= value of risk reduction
A "statistical life" has traditionally referred to the aggregation of small

risk reductions across many individuals until that aggregate reflects a
total of one statistical life
It has led to confusion because it has been interpreted as referring to

the loss of identified lives
If risk was reduced
savings of 200 statistical lives
by 1 in 1,000,000
for 1 year
in a population of 200 million
CAAA Benefit Cost AnalYSis
=value of risk reduction
1(11
savings of 200 actual lives
c
Page 18
36
The VSL has been a shorthand way of referring to the monetary value
or tradeoff between income and mortality risk reduction, i.e. the
willingness to pay for small risk reductions across large numbers of
people
Deriving Value of Statistical Life

Willingness to Pay - Road Hazard Studies
Example:
- Cars with seatbelts cost $300
more than cars without seatbelts
37
- Buying a car with that option

reduces the probability of death
by 1 in 100,000
Probability of death by
- If people are willing to pay for this option, we can

infer that the person is placing a valuation on his/her
life of at least $300 x 100,000 = 30,000,000 ($30
million)
TCEQ Chief Engineer's Office May 17, 2012.
1 in 100,000
........
f .........
Page 19
$3ijql
,,1~9~JOO
::;$3(J'.milliQ.n
"
Deriving Value of Statistical Life

Income vs. Risk - Occupational Studies
Example:
- A job carries a higher risk of
injury, but pays $ 500 more per year
$ 500
38
- The more dangerous job carries

an increased risk of injury by
1 in 10,000
- If people are willing to pay for this option, we can

infer that the individuals are placing a valuation on
their lives of at least $500 x 10,000 = 5,000,000 ($5
million)
May 17, 2012.
r';~7'~i. '500,1
rI ....;.'. ..f/
. "ri/~ I
.;<x18(01.6
I .......; ."i.'ii'~1
[.7$~m~IU.~~1
Page 20
11
Interpreting VSL in the Media
"When these new [EGU MACT] standards are finalized, they will assist in preventing 11,000 heart
attacks, 17,000 premature deaths, 120,000 cases of childhood asthma symptoms and
approximately 11,000 fewer cases of acute bronchitis among children each year. Hospital visits will
be reduced and nearly 850,000 fewer days of work will be missed due to illness."
- Lisa Jackson, EPA Administrator, 2011
[ This was interpreted as:
American lives ...

- John D. Walke, Natural Resources Defense Council, 2011
"These new standards mark a huge step forward in clean air protections and will be responsible for
saving thousands of lives each year."
- Albert A. Rizzo, MD, National Volunteer Chair of the American Lung Association
"The new EPA mercury standards will save countless lives and improve the quality of life for
millions."
- New York Mayor Michael Bloomberg
May 17, 2012
Page 21
39
"EPA's proposed mercury and air toxics standards ... are projected to save as many as 17,000
"
Appropriate Use of Value of Statistical Life

VIe Btntftli fWd Costs "fllle aUII All' Actfron 1991) (0 1020
TADLE 5-8.
LIFE YEARS GAINEP ANO LIFE EXPECTANCY GAIN ESTIMATES FROM THE
POPULATION SIMULATION MODEL
EPA V5L:$8,900,OOO
LIFEYEARS GAlHED IN
SpECIFIC YEARS
(ANNUAL)
AGE COHORT
START AGE I
Lives Saved vs. Life-Years Added
END AGE
-'.'1 .... 49~~..
2020
CUMULATIVE UF! YARS

GAINED THROUGH TARGET
YEAR
2040
2020
~~~~.- .~~'-~
910,000
21'' '
~20
LIFE EXPECTAHCY GAINS

(YEARS)
2010
I 2020 j 2040
-~:~~.
~.871
4r.ri~:~:.-"-.-~.-"- -~--.~~-~='~:: -:ID~~.:.I

40
100+
Not~:
71,000
.OOO .... 0.63

2,300,000
0.84
0.91
0.88
;i~l':;:J~;;; _~~~ ~-~u:1
200,000
490,000
3,800,0001 22.000,000
),100,000
80,000,000
Column ent.rles tooot ~ utoroundlnR. UtI!!! expectancy mutts areincrtmentllptriocl
conditional Ufe- ~xpe-<:tanc:Y.ain$ at the start ap of t~cohort.
The median age of people who gain extra

months of life from cleaner air is close to
80 years
Utility
o ......,_________1..-_
Time
Figure: Determining OueImy..Adjusted Survlvai-Length of tile (lime) is plotted
agaitlat quality 01 Nfo (utilh.y). The area underthe curve.r.p.lM4lIn~s-quality~adjtlstfld
...-., _ _ _ d In qualit,....ju>1ed I~_IS (OALVs).
Adjustment of VSL for quality of life:

EPA VSL of $8,900,000 appropriate
for healthy young adult (::::25)
6: 1 ratio for 25 vs. 80 year old
From Weeks 1995

CAAA Benefit Cost Analysis c TCEQ Chief Engineer'S Office May 17, 2012.
Page 22
40
Deaths "prevented or avoided" I ..

Gains in life expectancy
I~.~:~~=~:~_-
17,_000
60,000
Clean Air Act - Benefits and Costs
reduced number of deaths in 2020 * value per statistical life saved

= 230,000 fewer deaths * $8,900,000 per life saved
::= $2 trillion
Benefit/Cost = $2 triUion/$0.065 trillion*::= 30
Adjusted estimate of benefit:

$19 billion
Benefit/Cost = $0.019 trillion/$0.065 trillion* ::= 0.3
~1ay
17, 2012
Page 23
41
life-years gained in 2020 * value per statistical life-year gained

=1,900,000 life-years gained * $150,000Ilife-year gained
::= $0.3 trillion
Benefit/Cost = $0.3 trillion/$0.065 trillion* ::= 5
11
Mercury & Air Toxics Standard
Mercury
$ 0.004-0.006
$ 1-2
Acid Gasses
Non-Ha Metals
$0
$0
:S$ 0.006
$ 32-87
$ 1-2
$ 33-90
Total
MATS is estimated to prevent 0.00209 IQ point loss per child (starting

immediately)
Each child will gain 0.0956 school days over their lifetime
0.00209 IQ pOints x 244,468 children
Assuming a net monetary loss per decrease in one IQ point of between

rv$8,000 and rv$12,000 (in terms of foregone future earnings)
Benefit
= $4.2M to
= 511
IQ pOints per year
$6.2M
Table adapted from testimony by Anne E. Smith 212010 to Subcommittee on Energy and Power
CAAA Benefit Cost Analysis TCEQ Chief Engineer's Office May 17, 2012.
Page 24
42
II
Oil 8r. Gas NSPS and NESHAPS
Benefits
NA
NA
- $15
$3.5
Non-monetized
benefits
11,000 tons of HAPS

190,000 tons of VOC
1.0 million tons of methane
Health effects of HAP exposure
Health effects of PM 2 .5 and ozone exposure
Visibility. impairment
Vegetation effects
Climate effects
670 tons of HAP

1,200 tons of VOC
420 tons of methane
Health effects of HAP exposure
Health effects of PM 2 .S and ozone exposure
Visibility impairment
Vegetation effects
Climate effects
".. .quantification of those benefits cannot be accomplished for this rule. This is not to imply that
there are no benefits of the rules; rather, it is a reflection of the difficulties in modeling the direct and
indirect impacts of the reductions in emissions for this industrial sector with the data currently available."
April 2012 RIA
CAAA Benefit Cost Analysis TCEQ Chief Engineer's Office May 17, 2012'
Page 25
43
Costs
II
PM Co-Benefits in RIAs
44
Cost
6,400
10,600
9,329
17
26,350
Double counting benefits: same statistical lives

counted in multiple rules
Different costs: unique to each rule
CAAA Benefit Cost Analysis. TCEQ Chief Engineer's Office May 17, 2012.
Page 26
II
Contact Information
Susana M. Hildebrand, P.E.
Chief Engineer
susana. [email protected]
45
(512) 239-4696
Michael Honeycutt, Ph. D.
Division Director, Toxicology
michael. [email protected]
(512) 239-1793
iVJay 17, 2012.
Page 27
Health Effects of Poverty and Unemployment

Poverty and unemployment have been recognized as risk factors for
morbidity and mortality since the 1800's (Virchow, 1848)
As of March 2012, there are 4,850 publications on this topic

Relation of real GOP per capita to age-adjusted death
rates, US 1900-2000 (natural logarithms).
Unemployment and All-Cause

Mortality
8.0000 I
Women
40 to 49.9
7.8000
HR(95% ell
1.73b (1.41, 2.11)
1.34b (1.15,1.56)
i!I 8
i
I.
50 to 65
40 to 49.9
50 to 65
+ ++.
.,.
+..".;....... .
Ii :::._': =?~
Less than 40
Men
'~r. ......._.......' )' ,v: ',-, ,i...., ..... .
7.6
1.17c (1.00,1.36)
""
RoelfsEltilISoc Sci MEld 2011; 7-2:840~4
6.8000
adi. R2do.954
6.8000 I ,
6.0000
i ,
8.5000
9.0000
9.5000
10.0000
10.500::
rea I GOP per capita
(logarithmic 1990 "international" Geary-Khamisdollaraper capita)
Brenner M Hint. J. Epidemiol. 2005;34:1214-1221

lVlay 17, 2012
Page 28
46
Mean Age
Less than 40
~ ~ --~':~~:;i::
Meta-analyses stratified by gender and age'

Gender
I)
With CAAA vs. Without CAAA

Tile Bellejlrs (l1/d Com a/rile Cleoll .J.ir .4~I/roIl1990 ro 2020
FIGURE 11.
CLEAN AIR ACT SECTION 612 SCENARIOS: CONCEPTUAL SCHEMATICI
-Freezes pollution controls at 1990

levels
-Assumes no additional state or local
regulation after 1990
-Assumes no improvements in
technology or efficiency
-"There is no way to validate the
counterfactual, without-CAAA
scenario estimates"
WlthoCAAA
1970
1990
2000
0
2010
2020
Time
TCEQ Chief Engineer's Office Mav 17, 2012
Page 29
47
r ------~--~-------Flr.it PrlJ.SpecINe
~
.A._ _-..
,r--'\
Oil & Gas NESHAPS

Tabl~4-7
Climate M~thane Benefits Using 'G\VP' Appl'oach

Total Benefits based on 100 real' GWP adjustmenr
(millions 2008S)
sec Yalue for 2015 emission reductions (Sllon

COl in 2008 dollars) 1
$6 (mean 5% discolillt rate)
Finall'IISHAP
Amendments
$0.05
$0.20
$0.32
Final NSPS
$100
$440
:\lethane Embsion Reductions 3 (M:\lT eOt'e)
$700
S1,300
17.0
48
$25 (mean 3% discolillt Glle)

$40 (mean 2.5% discOlIIltr3te)
$76 (95 111 percentile at 3% discount fate)
$0.60
0.008
April1B. 2012 Press Conference

"Today's rules would yield significant reductions in methane, a potent greenhouse gas. EPA's
Regulatory Impact Analysis for the rule estimates the value of the climate co-benefits that
would result from this reduction at $440 million annually by 2015."
-Gina McCarthy
Reported monetized benefit: $0
Note: benefits calculated at 3%, but costs at 7%

May 17, 2012
Page 30
..
Year
Costs of the Clean Air Act and Amendments

PM Co-
RIAs for Rules Not Targeting Ambient PM 2.5
PM CoBenefits Are
Benefltsare
Cost ($ Bllllon)*
Only Benefits
>50% of Total
Quantified
1997
Ozone NAAQS (.121hr=>.08 8hr)
1997
Pulp&Paper NESHAP
1998
9.60
Ox SIP call & Section 126 Petitions
Regional Haze Rule
1999
Final Section 126 Petition Rule

tationary Ree! rocating Internal Combustion En in NESHAP
Industria! Boilers & Process Heaters NESHAP
2005
Clean Air Mercury Rule
1.74
1.15
0.25
2006
tationarv Compression I nition Interna! Combustion En ine N$P$
1.50
0.06
2007
Control of HAP from mobile sources
200S
zone NAAQS (.08 8hr =>.075 8hrl
S.ZO"
3,20
200S
~ad (Pb) NAAQ5
2009
New Marine Comoress'n-! n En ines >30 l
2010
2010
er Clinder
eciprocating Internal Combustion Engines NESHAP Comp.lgnlt.
02 NAAOS (l-hr, 75 ppb)
Existing Stationary Compression Ignition Engines NESHAP
Industrial, Comm, and institutional Boilers NESHAP
2011
Indus'l, Comm'I, and Institutional Boilers & Process Heaters NESHAP
2011
amm'l & Indus'J Solid Waste Incin. Units N$PS & Emission G'lines
ontrol of GHG from Medium & Heall'{-Duty Vehicles
2011
Ozone Reconsideration NAAOS
2011
Utility Boiler MACf NESHAP (Final Rule's RIA)
2011
Mercurv Cell Chlor Alkali Plant Mercury Emissions NESHAP
2011
2011
ewage Sludge Incineration Units NSPS & Emission Guidelines

Ferroa!loys Production NESHAP Ammendments
0.37
x
x
,
,
,
>99,9%
1.50
x
x
0,25
0.49
2_90
0.28
2,QO&
B.20R'
x
x
~99%
Boiler MACT
- EPA estimated
cost:$2.6 billion
annually
- Independent
analysis:$14.5
billion
15,60
9_60
0,00
x
x
Total:
($2006)
0.36
1.90
EPA/NHTSAJoint Ught-Duty GHG & CAFES
2011
2011
0.02
0.004
+ MATS-9.3 Partial Total: 69.97
60.67
May 17, 2012.
Page 31
49
lean Air Visibility Rule/BART Guidelines
0.86
0.90
2005
2010
EPA estimated
cost:$800 million
annually
- Independent
analysis: $120
billion by 2015
1.66
,
,
,
2004
2010
6.48
1999
2004
Cross State Ai r
Pollution Rule
II
Business Impact
DIe B~ni'fin and ((un Df nu' C1NUJ ....i, _i~IJ"tm 199fJ It}
FIGURE 8?b.
}(J]tJ
PERCENT CHANGE IN INDUSTRY OUTPUT IN 202.0: LABOR FORCE-ADJUSTED CASE
-10.11%
-8.0%
-P. -
Pen::o;entagt' Change with Clean Air Act

..e.O%
-4.0'!'"
-2.G%
0.0%
2.0%
Coal
VARIABLE
GOP
MODELRUH
With Clean Air Act ($ billion)
_.".
::
"".... Gas
....
2020
$17,338
$20,202
$15,059
$17,350
$20,197
-$32
-$12
$5
-0.21%
-0.07%
0.02%
$10.969
$12,699
$14,881
$10.972
$12,696
$14,876
Mining (other)
C<ms1NClion
Food
%chanee
.Wit.h.ctea"Air Act ($ billion)
Without Clean Air Act ($ billion)
Chanee (S billion)
%change
Chanee (S billion)
%chanee
Teld_&App.
""'"
.....
I!!!!\!IJ
I!!!!!!!
$3
S5
0.02%
0.03%
II
!~
$22
S29
0.13%
0.15%
Plas.lm&Ru1:I
-$3
S11
Pulp & Paper

Printing
OtemJc31s
""c.m.nt
-0.03%
0.08%
50
$15.027
"
Chanae ($ billion)
Htck.tan EV
(annual)
2015
2010
Without Clean Air Act ($ billion)
Consumption
..
OIJde Oil
TABLE 8-8.
SUMMARY OF ANNUAL MACROECONOMIC IMPACTS; LABOR FORCE-ADJUSTED CASE'
OthtrMinera1s
tDn&"""
Ah.mirwm
OthNPritn.y
F.lbricated Mel
r ,~ry&E
Hote"
CornputerEqui
......
'""",,,
Eleotrcnc Equ
1. Result. are exprel,ed tn year 2006 dolla...
1hI\spcft3tiOn
c: P
~~
~b
TCEQ Chief Engineer's Office. t-liay 17, 2012
Page 32
Ml$oeIbneoIa -urtn;
WhctU31e& F
Tr.JnSport3tioo
nfcIm3tjon~
FIIUnCe&R2.'l
Su!lines.sSeN
Educmion
HealthSeNce
OthefSEtI/ioes
'-
,-
Adjusted Benefits Estimate
Tony Cox, 2011:

($1.8 trillion initial estimate)
x (1/6 reduction factor for VSL if age or VSLY is considered)
x (0.5 probability that a true association exists)
x (0.5 probability that ambient concentrations are above any thresholds or nadirs
in the C-R function, given that a true causal C-R relation exists)
x (0.5 expected reduction factor in C-R coefficient by 2020 due to improved
medication and prevention of disease-related mortalities)
ir~"5i~.~'Q....s'i~;o
:S7~.),.
~:~:~., . . :::,!:.j;:'.:;s:,>.::.:,:,~.;.,. .".",)/:.:.,.:,:~:,:.'", "~~ ,,);1' ;;:
May 17, 2012
Page 33
51
x (0.5 probability that a true association is causal, given that one exists)
52
Chairman HARRIS. Thank you very much.
I now recognize Mr. Eugene Trisko for five minutes to present
his testimony.
STATEMENT OF MR. EUGENE TRISKO,
ATTORNEY AT LAW, ON BEHALF OF THE
AMERICAN COALITION FOR CLEAN COAL ELECTRICITY
Mr. TRISKO. Thank you, Mr. Chairman, Ranking Member Miller.

I am Eugene Trisko. I am here on behalf of the American Coalition for Clean Coal Electricity. And I have conducted, for the better
part of the last decade, an annual study as a consultant to ACCCE
entitled, Energy Cost Impacts on American Families. This study
really started soon after the Kyoto Protocol when a question arose,
what are American families spending on energy? Because there
were a variety of estimates at that time when the Kyoto Protocol
was being considered in the United States, a number of studies
that suggested impacts on the order of $500 or $1,000 per household or more.
So we wanted to try to get a handle on a baselinewhat are
Americans spending now for energy? So having done this study
pretty much on an annual basis since 2000, we have created, if you
will, a baseline that has allowed us to track changes in energy
costs. The report analyzes consumer energy costs since the year
2001 for all U.S. households and examines the pattern of energy
expenditures among four income levels and for senior and minority
families. It relies on historical energy consumption survey data and
current energy price forecasts from the Department of Energys Energy Information Administration. By way of a footnote, EIA is just
now beginning to release the results of its 2009 survey of residential energy consumption and it has not yet gotten to the point
where it is releasing consumption or expenditure data. When we
get that information, we will update the study accordingly. But
based upon the preliminary results from the 2009 survey, it appears that the consumption data, if anything, may be somewhat
higher than they were in the previous study in 2005.
Slightly more than one half of U.S. households have average
pretax annual incomes below $50,000. Mr. Chairman, this country
is divided precisely in half at an annual household income pretax
of $50,000. Our median family income today is $49,455. And that
has not changed in principle in the 10 years in which I have been
conducting this study, with no adjustment for inflation. In 2001,
families with gross annual incomes below $50,000 spent an average
of 12 percent of their average after-tax income of $21,800 on residential and transportation energygasoline. In 2012, these households are projected to spend 21 percent of their average after-tax
income of $22,390 on energy.
Family incomes have not kept pace with the rising cost of energy.
The U.S. Census Bureau reports that since 2000, real inflation-adjusted median household income has declined by six percent and is
seven percent below the median household income peak of $53,000
that occurred in the year 1999. Higher gasoline prices account for
nearly 4/5ths of the increased cost of energy for consumers since
2001. In nominal dollars, average U.S. household expenditures for
53
gasoline will grow by 136 percent from 2001 to 2012, based on EIA
gasoline price projections for 2012.
Electricity has maintained relatively lower annual average price
increases compared to residential natural gas and gasoline. Electricity prices have increased by 51 percent in nominal dollars since
1990, well below the 72 percent rate of inflation in the consumer
price index. The nominal prices of residential natural gas and gasoline have nearly doubled and tripled, respectively, over this period.
Virtually all of the residential electricity price increases over the
past two decades have occurred since 2000. These increases are due
in part to additional capital, operating, and maintenance costs associated with meeting clean air and other environmental standards.
Lower-income families, including millions of fixed-income seniors,
are more vulnerable to energy costs than higher-income families,
because energy represents a larger portion of their household budgets. Energy is consuming 1/5th or more of the household incomes
of lower- and middle-income families, reducing the amount of income that can be spent on food, housing, health care, and other necessities.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Trisko follows:]
54
Statement of Eugene M. Trisko
Before the Committee on Science, Space and Technology
Subcommittee on Energy and Environment
June 6,2012
Good afternoon, Chairman Harris, Ranking Member Miller, and members of

the Subcommittee,
I am here today to summarize the findings of a study of the impacts of rising

energy costs on American families. I have conducted this study periodically
since 2000 for the American Coalition for Clean Coal Electricity and its
predecessor organizations. The latest version, "Energy Cost Impacts on
American Families, 2001-2012," is attached to my testimony.
The report analyzes consumer energy cost increases since 2001 for all u.S.
households and examines the pattern of energy expenditures among four
income levels and for senior and minority families. It relies on historical
energy consumption survey data and current energy price forecasts from the
U.S. Department of Energy's Energy Information Administration (EIA).
Energy costs are summarized in nominal dollars by household income
category for U.S. households in 2001,2005, and 2012, using data from EIA
and the U.S. Bureau of the Census. Energy price projections for 2012 are
based on the DOEIEIA Short-Term Energy Outlook released in January
2012. At that time, EIA projected an average gasoline price of $3.54 per
gallon in 2012.
55
Energy expenditures as a percentage of nominal after-tax income are
estimated after the effects of federal and state income taxes and federal
social insurance payments. The 2012 projections in this report are based on
U.S. Bureau of the Census household income data for 2010 (the most recent
available) and projected energy prices for 2012.
Key findings of this report are:
In 2010, the median household income of U.S. families was $49,445.

Slightly more than one-half of U.S. households have average pre-tax
annual incomes below $50,000. In 2001, families with gross annual
incomes below $50,000 spent an average of 12% oftheir average
after-tax income of$21,834 on residential and transportation energy.
In 2012, these households are projected to spend 21% of their average
after-tax income of $22,390 on energy.
Family incomes have not kept pace with the rising costs of energy.
Since 2007, the U.S. Census Bureau reports that real (inflationadjusted) median household income has declined by 6% (from
$52,823) and is 7% below the median household income peak
($53,252) that occurred in 1999.
Poverty rates have increased to historic highs along with the declining
long-term trend in family incomes. The number of people in poverty
in 2010 was the largest number in the 52 years since the Census
Bureau began to publish poverty statistics.
56
Higher gasoline prices account for nearly four-fifths of the increased
cost of energy for consumers since 2001. In nominal dollars, average
u.s. household expenditures for gasoline will grow by 136% from

2001 to 2012, based on EIA gasoline price projections for 2012. In
comparison, residential energy costs for heating, cooling, and other
household energy services will increase on average by 43%, from
$1,493 in 2001 to a projected $2,131 per household in 2012.
Among consumer energy goods and services, electricity has

maintained relatively lower annual average price increases compared
to residential natural gas and gasoline. Electricity prices have
increased by 51 % in nominal dollars since 1990, well below the 72%
rate of inflation in the Consumer Price Index. The nominal prices of
residential natural gas and gasoline have nearly doubled and tripled,
respectively, over this period.
Virtually all of the residential electricity price increases over the past
two decades have occurred since 2000. These increases are due in part
to additional capital, operating and maintenance costs associated with
meeting clean air and other environmental standards.
Lower-income families are more vulnerable to energy costs than

higher-income families because energy represents a larger portion of
their household budgets. Energy is consuming one-fifth or more of the
household incomes of lower- and middle-income families, reducing
the amount of income that can be spent on food, housing, health care,
and other necessities.
57
Fixed-income seniors are a growing proportion of the U.S. population,
and are among the most vulnerable to energy cost increases due to
their relatively low average incomes. In 2010; the median gross
income of25.4 million households with a principal householder aged
65 or older was $31,408, 36% below the national median household
income.
These summary findings are discussed in more detail in the principal report.
I am happy to answer any questions that the Subcommittee may have.
Thank you.
58
Energy Cost Impacts on American Families,

2001-2012
.2001
.2005
78%
5% 7% 9%
<$10K
$10-<30K
$30-<50K
2=$50K
Energy Costs as Percentage of Annual Household After-Tax Income
February 2012
www.americaspower.org
59
Summary of Findings
This report analyzes consumer energy cost increases since 2001 for all u.s. households
and examines the pattern of energy expenditures among four income levels and for
senior and minority families in 2012. It relies on historical energy consumption survey
data and current energy price forecasts from the U.S. Department of Energy's Energy
Information Administration (EIA).I Energy costs are summarized in nominal (thencurrent) dollars by household income category for u.s. households in 2001,2005, and
2012, using data from EIA and the u.s. Bureau ofthe Census. 2 Energy price projections
for 2012 are based on the DOEIEIA Short-Term Energy Outlook released in January
2012.
Energy expenditures as a percentage of nominal after-tax income are estimated after the
effects offederal and state income taxes and federal social insurance payments. The
2012 projections in this report are based on u.s. Bureau of the Census household
income data for 2010 (the most recent available) and projected energy prices for 2012.
Key findings of this report are:
In 2010, the median household income of U.S. families was $49,445. Slightly
more than one-half of U.S. households have average pre-tax annual incomes
below $50,000. In 2001, families with gross annual incomes below $50,000 spent
an average of 12% of their average after~tax income of$21,834 on residential and
transportation energy. By 2005, energy costs rose to 16% of their average aftertax income of$22,682. In 2012, these households are projected to spend 21 % of
their average after-tax income of $22,390 on energy.
Family incomes have not kept pace with the rising costs of energy. Since 2007,
the U.S. Census Bureau reports that real (inflation-adjusted) median household
income has declined by 6% (from $52,823) and is 7% below the median
household income peak ($53,252) that occurred in 1999.
Poverty rates have increased to historic highs along with the declining long-term
trend in family incomes. The number of people in poverty in 2010 was the largest
number in the 52 years since the Census Bureau began to publish poverty
statistics. Poverty is more prevalent among some minority groups. Some 27% of
Blacks and 26% of Hispanics lived in poverty in 2010, compared with 15% for
the overall population.
60
Higher gasoline prices account for nearly four-fifths of the increased cost of
energy for consumers since 2001. In nominal dollars, average U.S. household
expenditures for gasoline will grow by 136% from 2001 to 2012, based on EIA
gasoline price projections for 2012. In comparison, residential energy costs for
heating, cooling, and other household energy services will increase on average by
43%, from $1,493 in 2001 to a projected $2,131 per household in 2012.
Electricity is the bargain among all consumer energy produCts. Among consumer
energy goods and services, electricity has maintained relatively lower annual
average price increases compared to residential natural gas and gasoline.
Electricity prices have increased by 51 % in nominal dollars since 1990, well
below the 72% rate of inflation in the Consumer Price Index. The nominal prices
of residential natural gas and gasoline have nearly doubled and tripled,
Virtually all ofthe residential electricity price increases over the past two decades
have occurred since 2000. These increases are due in part to additional capital,
operating and maintenance costs associated with meeting clean air and other
environmental standards.
Lower-income families are more vulnerable to energy costs than higher-income
families because energy represents a larger portion of their household budgets.
Energy is consuming one-fifth or more of the household incomes oflower- and
middle-income families, reducing the amount of income that can be spent on
food, housing, health care, and other necessities.
In 2010, 62% of Hispanic households and 68% of Black households had average
annual incomes below $50,000, compared with 46% of white households and
39% of Asian households. Due to these income inequalities, the burdens of
energy price increases are imposed disproportionately on Black and Hispanic
households.
Fixed-income seniors are a growing proportion of the U.S. population, and are
among the most vulnerable to energy cost increases due to their relatively low
average incomes. In 2010, the median gross income of 25.4 million households
with a principal householder aged 65 or older was $31,408, 36% below the
national median household income.
61
Energy Costs for U.S. Families, 2001-2012
Energy costs for residential utilities and gasoline continue to strain low- and middleincome family budgets. As Table 1 illustrates, the average American family with an
after-tax income of$53,229 will spend an estimated $6,088 on energy in 2012, or 11%
of the family budget. The 60 million households earning less than $50,000representing 50.4% of U.S. households-will devote an estimated 21% of their after-tax
incomes to energy, compared with 9% for households with annual incomes above
$50,000. For the 28 million lower-income families with incomes between $10,000 and
$30,000, energy expenditures will consume 24% of average after-tax incomes,
compared with 14% in 2001.
The summary income and energy expenditure data in Table 1 are based on u.s. Bureau
of the Census pre-tax household income data for 2010 (the most recent available) and
energy prices for 2012 projected by DOE/EIA. The Congressional Budget Office has
calculated effective total federal tax rates, including individual income taxes and
payments for Social Security and other social welfare programs. 3 State income taxes are
estimated from current state income tax rates.
Table 1. Estimated Household Energy Expenditures as a Percentage of Income,
2012
Pre-tax income
<$IOK
$1O-<$30K
$30-<$50K <$50K
~$50K
Average
Est. average after-tax

income
Percentage of
households
Residential energy
$4,764
$18,106
$33,541
$22,390
$84,263
$53,229
7.8%
23.6%
19.0%
50.4%
49.6%
100.0%
$1,596
$1,773
$2,044
$1,848
$2,554
$2,13l
Transportation fuel
$2,106
$2,621
$3,705
$2,951
$4,953
$3,957
Total energy
$3,702
$4,394
$5,749
$4,799
$7,507
$6,088
Energy pct. of after-tax 77.7%

income
24.3%
17.1%
21.4%
8.9%
11.4%
Source: Appendix Table 1.
Many lower-income families qualify for federal or state energy assistance. However,
these programs are hard-pressed to keep up with the increase in household energy costs.
In FY2011, funding for the federal Low Income Home Energy Assistance Program
4
(LIHEAP) was cut from $5.1 billion to $4.7 billion. Based on DOEIEIA's 2005
Residential Energy Consumption Survey (2009), the $4.7 billion funding level for
LIHEAP would offset less than 2% oftotal U.S. residential energy bills.
4
62
The portion of household incomes devoted to energy has increased substantially since
2001 (see Chart 1). In 2001,62 million families with gross annual incomes less than
$50,000 (2001$) spent an average of 12% of their after-tax income on residential and
transportation energy. In 2012, energy will account for an average of 21 % ofthe aftertax income ofthe 60 million American families in this income category. Energy cost
burdens are greatest on the poorest families, those earning less than $10,000. Their
average energy bills increased from 36% of estimated after-tax income in 2001 to 78%
in 2012. These estimates do not account for any governmental energy assistance that
these families may receive, and thus do not reflect actual personal energy consumption
expenditures.
Chart 1
Energy Costs as Percentage of Nominal After-Tax Income,
2001, 2005, and Projected 2012
2001
1112005
78%
5% 7% 9%
<$10K
$10-<30K
$30-<50K
:::$50K
Source: Appendix Table l.
Relative Energy Price Increases

Among key consumer energy products, electricity has increased at the lowest rate
measured in nominal dollars over the past two decades. Chart 2 provides an index of
consumer energy prices in nominal dollars since 1990. Prices for residential natural gas
and gasoline have nearly doubled and tripled, respectively, while residential electricity
prices increased by 51 %, well below the 72% rate of inflation based on the Consumer
Price Index between 1990 and 2011. 5
5
63
Chart 2
Price Trends of Consumer Energy Products in Nominal Dollars, 1990-2012
(Index 1990 = 1.0)
3.5,-----------------------3.0 ;...........- . - - - - - - - - - - - - - - - - - . -......... - -.............,-
2.5
+. . - - - - - - - - - - - - - - - - - - - - - -.. ."F--'ic--4--
0.5 f - - - - - - - - - - . - - - - - - - - - - - - - - - 0.0
1990
2000
1995
-
Electricity
Nat'l Gas
2005
2010
Gasoline
Sources: U.S. DOEIEIA, Annual Energy Review 2010 and Short-Tenn Energy Outlook
(January 2012).
Unlike other consumer energy products, electricity has maintained a relatively low rate
of price increase below the overall rate of inflation. However, as Chart 2 indicates,
virtually all of the residential electricity price increases over the past two decades have
occurred since 2000. These increases are due in part to additional capital, operating and
6
maintenance costs associated with meeting clean air and other environmental standards.
Current and prospective EPA rules for the utility sector are expected to result in
additional electricity price increases in many areas ofthe country. For example, U.S.
EPA estimates the annual costs of compliance with one recent Clean Air Act regulation
- the utility Mercury and Air Toxics Standards rule - at $9.6 billion ($2007) in 2016. 7
The projected annual cost of this rule is 45% greater than EPA's $6.6 billion ($2006)
estimate of the costs of compliance with all utility Clean Air Act requirements in 2010. 8
Electric Utility Fuel Cost Trends

The relatively modest long-term rate of price increase for residential electricity reflects,
in part, the electric utility industry'S historic reliance on low-cost coal for roughly onehalf of its energy supplies. As shown in Chart 3, coal prices delivered to electric utilities
over the past decade have remained low and stable relative to competing fuels such as
6
64
natural gas and petroleum. 9
EIA forecasts that domestic coal will cost $2.40 per million British Thermal Units
(MMBTU) delivered to power plants in 2012. 10 EIA projects the cost of natural gas
delivered to utility plants in 2012 at $4.23IMMBTU. 1I In its most recent long-term
projections, EIA forecasts that natural gas wellhead prices will remain below $5 per
thousand cubic feet (mct) in 2010$ through 2023, assuming continued success in the
development of shale gas reserves. 12 EIA estimates that natural gas wellhead prices will
reach $6.52 (in 2010$) per mcf(or $6.721MMBTU) in 2035.13 Minemouth coal prices
are projected to increase from $1.76 per MMBTU in 2010 to $2.51 per MMBTU in
2035 (2010$).14
Chart 3
Electric Utility Fuel Costs, 1998-2012
(Nominal $ per Million BTU)
$20.00
$18.00
$16.00
r-
$14.00
'- -
$12.00
-Coal
"-,,
Nat'l Gas
/\
Oil
/ \ I
$10.00
1/\
$8.00
/,-~/
$6,00
$4.00
$2.00
$0.00
\
\.....----
/::: /
.--.
I
I'
~,~
~'--'----"
, ,
~---.--r---"~'~.-,
1998
2002
2004
2000
2006
2008
2010
Sources: U.S. DOEIEIA, Electric Power Annual (2010) and Short-Term Energy Outlook
(January 2012).
Consumer Energy Cost Estimates

The distribution of U.S. households by income categories provides the basis for
estimating the effects of energy prices on consumer budgets in 2012. EIA's 2001 and
2005 Surveys of Residential Energy Consumption l5 are the principal sources for
estimating energy expenditures for residential heating, cooling, electricity, and other
household energy services. For this report, the EIA 2005 survey is updated with Census
Bureau 2010 population data and EIA's January 2012 forecast of2012 residential
7
65
energy prices.
EIA's 2001 Survey of Household Vehicles Energy Use 16 provides information for
estimating transportation energy costs by household income category based on gallons
of gasoline used per household. These transportation data are updated using Census
Bureau 2010 population data and EIA's January 2012 national average retail gasoline
price estimate for 2012 of$3.54 per gallon.
It is assumed that household gasoline usage in 2012 will be 6.3% below the levels of the
2001 survey, reflecting a decline in household vehicle-miles traveled. The Department
of Transportation's 2009 National Highway Transportation Survey (NHTS) reports that
average vehicle miles traveled per household declined from 21,187 miles in 2001 to
19,850 miles in 2009. 17 No adjustment is made for improved mileage performance
because fleet average fuel efficiency has been flat at approximately 25 MPG since
1990. 18 The 2009 NHTS does not provide data on transportation expenses by income
category, but its aggregate estimate of household gasoline expenditures for 2009 is
19
consistent with the findings of this report.
Residential and Transportation Energy Expenses
The principal residential energy expenses are for electricity and natural gas for heating,
cooling, lighting, and appliances. Some homes also use propane fuel and other heating
sources, such as home heating oil, kerosene, and wood.
Gasoline accounts for the largest single increase in consumer energy costs over the past
decade. EIA's Short-Term Energy Outlook projects 2012 average retail gasoline costs
at $3.54 per gallon, more than double the $1.47 per gallon price in 2001. In 2012, the
average U.S. family will spend an estimated $3,957 on gasoline, compared with $1,680
in 2001 - an average increase of $2,277 per household.
The increase in gasoline prices follows a decade-long trend of increased market shares
of pickup trucks and sport utility vehicles (SUVs), and an increase in the average
number of vehicles owned per household. 20 Despite the success of the "Cash for
Clunkers" program, many families continue to own low-efficiency vehicles with low
trade-in values.
The impacts of residential and transportation energy costs on low- and middle-income
families are summarized in Table 2 and in Appendix Table 1. Residential energy costs
have increased on average by 43% since 2001, from $1,493 to $2,131 per household.
Consumer costs for gasoline grew by 136% during this period, accounting for 79% of
the overall $2,870 increase in total household energy costs since 2001.
8
66
Table 2. Estimated After-Tax Income and Energy Costs by Income Category,
2001, 2005, and Projected 2012
Pre-tax annual income:
(In nominal dollars)

<$IOK $1 0-<$3 OK $30-<$50K
<$50K
?:$50K
Totals
Est. aV2. after-tax income

2001
2005
2012
$5,532
$5,249
$4,764
$17,520
$18,198
$18,106
$32,380
$33,716
$33,541
$21,834
$22,682
$22,390
$76,054
$81,066
$84,263
$47,396
$49,924
$53,229
Residential enerln' $
2001
2005
2012
$1,039
$1,351
$1,596
$1,260
$1498
$1,773
$1,456
$1,733
$2,044
$1,299
$1,565
$1,848
$1,836
$2,173
$2,554
$1,493
$1,850
$2,131
Transport enerln' $
2001
2005
2012
$934
$1,513
$2,106
$1,160
$1,878
$2,621
$1,638
$2,652
$3,705
$1,306
$2,119
$2,951
$2,195
$3,554
$4,953
$1,680
$2,790
$3,957
Total enefin' $
2001
2005
2012
$1,973
$2,863
$3,702
$2,420
$3,375
$4,394
$3,094
$4,385
$5,749
$2,605
$3,684
$4,799
$4,031
$5,725
$7,507
$3,218
$4,640
$6,088
Source: Appendix Table 1.
Household Energy Cost Impacts

Energy costs are straining low~ and middle-income family budgets. Heating, cooling,
and transportation are necessities of life, and the rapid increase in consumer energy costs
is impacting low- and middle-income family budget choices among energy and other
necessary goods and services, such as health care, housing, and nutrition.
As energy costs have risen over the past decade, the real, inflation-adjusted incomes of
American families have been declining. The u.s. Census Bureau reports in its latest
assessment of income and poverty that:
Real median household income was $49,445 in 2010, a 2.3 percent decline
from 2009. Since 2007, median household income has declined 6.4 percent
(from $52,823) and is 7.1 percent below the median household income
21
peak ($53,252) that occurred in 1999.
67
Poverty rates have increased along with the decline in real family incomes over the past
decade, reaching historic highs in 2010;
The official poverty rate in 20 I 0 was 15.1 percent-up from 14.3 percent
in 2009. This was the third consecutive annual increase in the poverty rate.
Since 2007, the poverty rate has increased by 2.6 percentage points, from
12.5 percent to 15.1 percent. ... In 2010, 46.2 million people were in
poverty, up from 43.6 million in 2009-the fourth consecutive annual
increase in the number of people in poverty.... The number of people in
poverty in 2010 is the largest number in the 52 years for which poverty
22
estimates have been published.
For low- and middle-income families, energy costs are now consuming a portion of aftertax household income comparable to that traditionally spent on major categories such as
housing, food, and health care. The Bureau of Labor Statistics' 2010 Consumer
Expenditure Survey reports that 121 million "consumer units" in the U.S. with an average
pre-tax income of$62,481 in 2010 spent an average of$16,557 (27%) on housing,
$6,129 (10%) for food, and $3,157 (5%) on healthcare?3
Energy Cost Impacts on Minorities

EIA's residential energy consumption surveys do not provide energy consumption
expenditures by income group combined with minority status. However, as illustrated in
Chart 4, the unequal distribution of household incomes is a principal factor leading to
disproportionate energy cost impacts on many minority families. More than 60% of
Black and Hispanic families had pre-tax household incomes below $50,000 in 2010,
compared with 39% for Asian families and 46% for white households.
Chart 4
Percentage of Households with Pre-Tax Incomes below $50,000, 2010
68%
60%
40%
11m Pet <$SOK
20%
0%
Asian
White
Hispanic
Black
Source: U.S. Bureau of the Census, Current Population Survey Annual Social and Economic
Supplement (2011).
10
68
Real, inflation-adjusted per capita incomes have declined due to the recession, with
larger impacts on Black and Hispanic families than on Asian or white households. The
U.S. Census Bureau reports that these recent declines in the real income of American
families are part of a long-term declining trend that has particularly impacted Black and
Hispanic households:
Since 2007, real median household income has declined for all race and
Hispanic-origin groups. Non-Hispanic-White household income declined
by 5.4 percent, Black household income by 10.1 percent, Asian household
income by 7.5 percent, and Hispanic household income by 7.2 percent.
Real median household income has not yet recovered to pre-200 1 recession
all-time highs. Household income in 2010 was 7.1 percent lower for all
races combined (from $53,252 in 1999),5.5 percent lower for nonHispanic Whites (from $57,781 in 1999),14.6 percent lower for Blacks
(from $37,562 in 2000),8.9 percent lower for Asians (from $70,595 in
2000), and 10.1 percent lower for Hispanics (from $41,994 in 2000). Black
. households experienced the largest household income percentage decline
among the race and Hispanic origin groupS.24
Poverty rates have increased in tandem with the declines in real incomes for Black and
Hispanic households. The Census Bureau reports that:
For Blacks, the poverty rate increased to 27.4 percent in 2010, up from 25.8
percent in 2009, while the number in poverty increased to 10.7 million
from 9.9 million. For Asians, the 2010 poverty rate and the number in
poverty ... were not statistically different from 2009. However, the poverty
rate increased for Hispanics to 26.6 percent in 2010 from 25.3 in 2009, and
the number of Hispanics in poverty increased to 13.2 million from 12.4
25
million.
Table 3 summarizes 2010 household incomes for Asian, Black, Hispanic, and white
families in different gross annual income brackets. In 2010, the average incomes of
Hispanic and Black families were 30% and 39% lower, respectively, than the average
income of white households. Asian households, on the other hand, enjoyed average
annual incomes of $84,828 in 2010 compared with the U.S. average income of $67,530.
Based on these income inequality data, disproportionate numbers of Black and Hispanic
families are more vulnerable to energy price increases than Asian or white families.
11
69
Table 3. Distribution oru.s. Households by
Pre-tax Income, 2010
Pre-tax annual income
Percentage of households
Asian
Black
Hispanic
White
U.S. average
Avg. pre-tax income
Asian
Black
Hisp~nic
White
U.S. average
<$ 10K $1O-<$30K
$30-<$50K
<$50K
2:$50K
Totals
38%
68%
62%
46%
50%
62%
32%
38%
54%
50%
100%
100%
100%
100%
100%
Averal!:e
$84,828
$44,802
$51,554
$73,439
$67,530
7%
16%
10%
6%
8%
17%
31%
30%
21%
23%
14%
21%
22%
19%
19%
$3,057
$4,968
$4,964
$5,005
$4,906
$19,841
$19,014
$19,718
$19,763
$19,638
$39,445
$38,862
$38,764
$39,315
$39,183
$23,923 $122,997
$21,646 $93,539
$24,123 $95,848
$25,778 $113,991
$24,752 $111,018
Source: U.S. Bureau of the Census, Current Population Reports - 2010 Annual Social and
Economic Supplement (2011).
Impacts on Senior Citizens

More than 28% of U.S. households receive Social Security benefits. The average basic
Social Security income ofthese 32.6 million households was $16,236 in 2010.26 Some
61 % of households receiving Social Security benefits also received other retirement
income averaging $22,006,z7
The U.S. Census Bureau reports that the median income of25.4 million households with
a principal householder aged 65 or older was $31,408 in 2010, 36% below the national
household median income of $49,445. 28
Lower-income senior households that depend mainly on fixed incomes are among those
most vulnerable to energy price increases. Food, health care, and other necessities
compete with energy costs for a share of the household budget. The $31,408 median
income of senior U.S. households means that half of these households depend on
incomes below this level.
Conclusion
On average, energy costs have nearly doubled as a fraction of annual family budgets
since 2001. The unequal distribution of incomes in the United States imposes
disproportionate energy cost burdens on minority and senior households. The average
after-tax incomes oflow- and middle-income U.S. families have not grown since 2001.
Meanwhile, inflation has eroded 27% of the value of American families' incomes. 29
12
70
The prices of petroleum-based fuels, particularly gasoline and home heating oil, have
increased significantly in the past decade. The rapid escalation of consumer energy
prices, along with stagnant income growth, magnifies the impact of energy costs on all
American families.
Acknowledgment - This report was prepared for ACCCE by Eugene M. Trisko, who has conducted
these analyses annually since 2000. Mr. Trisko is an attorney and energy economist who represents
labor and industry clients. He previously served as at an attorney in the Bureau of Consumer Protection
of the U.S. Federal Trade Commission and as an expert witness on utility cost of capital.
Notes
1 Data on residential energy consumption patterns by income are derived from U.S. Department of
Energy, Energy Information Administration, "Survey of Residential Energy Consumption," (2001 and
2005 surveys)," available at http://www.eia.doe.gov/emeu/recs/contents.html. Data for 2005 energy
consumption by household income are updated to estimated 2012 values based on consumer residential
energy cost projections for 2012 in EIA's "Short-Term Energy Outlook" (January 2012).
2 Household income by gross income category are calculated from the 2010 distribution of household
income in U.S. Bureau of the Census, Current Population Survey, "Annual Social and Economic
Supplement" (2011).
.
3 Congressional Budget Office (CBO), "Effective Federal Tax Rates Under Current Law, 2001 to
2014" (August 2004), and "Effective Federal Tax Rates 1979-2006" (April 2009). Effective federal tax
rates for the income categories in this paper were interpolated from CBO' s tax rates by income quintile
based on the distribution of 200 1, 2005 and 2010 household incomes. State income tax rates are
estimated from tax rates summarized in Federation of Tax Administrators,
http://www.taxadmin.orglftalrate/ind_inc.html.
4 See, http://www.neada.orglappropriations/index.html.
5 U.S. Bureau of Labor Statistics, CPI Inflation Calculator, available at http://data.bls.gov/cgibinlcpicalc.pl
6 See, U.S. EPA, "The Benefits and Costs of the Clean Air Act from 1990 to 2020" (2011) at Table 3-2
(electric utility direct annual compliance costs increased from an estimated $1.4 billion ($2006) in
2000 to $6.6 billion ($2006) in 2010.) Since 2000, the utility sector has complied with the federal acid
rain program enacted in the 1990 Clean Air Act Amendments, EPA's 1998 Ozone Transport Rule
reducing nitrogen oxide emissions in 19 eastern states, Phase I of EPA's 2005 Clean Air Interstate Rule
requiring further reductions of sulfur dioxide and nitrogen oxide emissions in the eastern U.S., and a
variety of other federal and state air and water quality standards.
7 U.S. EPA, "Regulatory Impact Analysis for the Final Mercury and Air Toxics Standards," (December
2011) at ES-14.
8 U.S. EPA, "The Benefits and Costs of the Clean Air Act," supra.
9 U.S. DOEIEIA, "Electric Power Annual 2010," (historical tables, 2011) and "Short-Term Energy
Outlook," (January 2012).
10 U.S. DOEIEIA, "Short-Term Energy Outlook" (January 2012), Table 2.
11
Id.
U.S. DOEIEIA, "Annual Energy Outlook 2012 Early Release," (January 2012) at 5. One thousand
cubic feet of natural gas is equivalent to approximately 1.04 million BTUs.
12
13
71
Id.
Id.
15 U.S. DOEJElA, "Residential Energy Consumption Survey, 2005," (2009), viewable at
http://www.eia.doe.gov/emeulrecs/contents.html.
16 U.S. DOEJElA, "Household Vehicles Energy Use: Latest Data & Trends" (November 2005),
available at http://www.eia.doe/gov/emeu/rtecs/nhts_surveyI2001l.
17 U.S. Department of Transportation, 2009 National Household Travel Survey (2011), Table 6.
18 U.S. Department of Transportation, "NHTS Brief' (April200S), Exhibit 3
19 U.S. DOT, NHTS, supra, at Table 34 (average household gasoline expenditures increased from
$1,275 in 2001 to $3,30S in 2009.) The average price of gasoline in 2009 was $2.40/gal\on, one-third
less than the $3.54/gallon price that ElA projects for 2012. Adjusted by the change in average gasoline
prices, the 2009 NHTS data imply average 2012 household gasoline expenditures of $4,366, compared
with the $3,957 estimate in this report.
20 U.S. Department of Transportation, 2001 National Household Travel Survey, "Summary of Travel
Trends" (December 2004).
21 U.S. Census Bureau, "Income, Poverty, and Health Insurance Coverage in the United States: 2010"
(2011), at 5.
22 Id., at 14.
23 See, Bureau of Labor Statistics, Economic News Release, September 27,2011, available at:
http://www.bls.gov/news.release/cesan.nrO.htm. See also, Economic Policy Institute, "Basic Family
Budgets: Working Families' Incomes Often Fail to Meet Living Expenses Around the U.S.," Briefing
Paper (2005), available at: http://www.epi.org/pub1icationlbp165/
(2011), at S.
25 ld., at 17.
26 U.S. Census Bureau, "American Community Survey - 2010 American Community Survey I-Year
Estimates," (2012).
13
14
27/d.
(2011), Table I.
29 U.S. Bureau of Labor Statistics, CPI Inflation Calculator, available at http://data.bls.gov/cgibinlcpicalc.pl
14
72
APPENDIX TABLE 1 - 2001. 2005 AND PROJECTED 2012 HOUSEHOLD INCOME AND ENERGY EXPENses
2001 HOUSEHOLD ENERGY EXPENSES BY INCOME CATEGORY ALL U.S. HOUSEHOLDS
<$10K
Households (Mil.)
Pet of tota! households
Avg pre-tax income
Effec. fed tax rate %
Est. state tax rate%:
Est. after-tax income
Residential energy $
Residential electric $
Other resid. energy $
Transport energy $
Total energy $
Energy % of after-tax inc.
Resid. % of after-tax Inc.
Trans, % of after-tax inc.
$10K-<$30K $30K-<l=$50K
>i=$50K
TOTALS
23.6
21.6%
47.0
43.0%
$39,201
13.4%
4.0%
$107,649
109.3
100.0%
$60,488
$32,380
$76,054
$1,456
$922
$534
$1,836
9.8
9.0%
$5,733
28.9
26.4%
$19,707
2.0%
1.5%
$5,532
8.5%
2.6%
$17,520
$1,039
$628
$1,260
$772
$411
$488
$1,160
$2,420
$934
$1,973
35.7%
18.8%
16.9%
13.8%
7.2%
6.6%
$1,638
$3,094
9.6%
4.5%
5.1%
23.1%
17.3%
6.3%
4.4%
$47,396
SUBTOTALS
$10K-<$SOK
52.5
48.0%
$28,470
10.7%
3.2%
$24,504
$1,493
$938
$555
$1,172
$664
$2,195
$4,031
$1,680
$3,218
<$50K
>I=$SOK
62.3
57.0%
$24,893
47.0
43.0%
$107,649
9.3%
3.0%
$21,834
$76,054
23.1%
6.3%
$1,348
$839
$1,299
$1,836
$806
$509
$1,375
$2,723
$493
$1,306
$1,172
$654
$2,195
$2,605
$4,031
3.2%
3.S%
11.1%
5.5%
5.6%
11.9%
6.0%
2.4%
6.0%
2,9%
>l=$50K
TOTALS
$10K-<$50K
<$50K
>/=$SOK
53.5
114.4
100.0%
51.5
45.0%
60.9
$63,344
$28,643
6.8%
5.3%
2.4%
2.9%
5.3%
2005 HOUSEHOLD ENERGY EXPENSES BY INCOME CATEGORY AlL U,S. HOUSEHOLDS

<$10K
Households (Mil,)
Pet of total households
Avg pre-tax income
Est. state tax rate%
Est. after-tax income
Resident!al energy $
Other resid. energy $
Transport energy $
Total energy $
Energy % of after-tax inc.
ResJd. % of after-tax inc.
Trans. % of after-tax inc,
9.4
$10K-<$30K $30K-</=$50K
8.2%
$5,400
1.8%
1.0%
$5,249
28.1
24,6%
$19,695
5.0%
2.6%
$18,198
4.0%
$33,716
$1,351
$1,498
$1,733
$765
$914
$583
$1,878
$1,098
$635
$2,652
$566
23.4
20.5%
$39,388
10,4%
46.8%
$106,947
17.9%
6.3%
4.5%
7.5%
3.2%
$49,924
$25,581
$2,173
$1,361
$812
$1,850
$1,150
$1,604
$998
$607
$2,230
$3,834
$3,375
$4.385
$3,554
$5,728
54,5%
25.7%
18.5%
28.8%
10.3%
13.0%
5.1%
7.9%
2.7%
4.4%
$1,513
$2,863
8.2%
16.7%
$81,066
7.1%
$699
$2,790
$4,640
53.2%
$25,055
6.6%
2.9%
$22,682
$1,565
$965
53.5
46.8%
$106,947
17.9%
6.3%
$81,066
$2,173
$600
$1,361
$812
$2,119
$3,684
$3,554
$5,728
9.3%
3.7%
15.0%
8.7%
16.2%
6.9%
9.3%
7.1%
5.6%
6.3%
2.7%
4.4%
PROJECTED 2012 HOUSEHOLD ENERGY EXPENSES BY INCOME CATEGORY ALL U,S, HOUSEHOLDS
<$10K
Households (MiL)
Pct of total households
Avg pre-tax income
Est. state tax rate%
Est after~tax income
Residential energy $
Other reslcL energy $
Transport energy $
Total energy $
Energy % of aftertsx inc.
Resid. % of after-tax inc.
Trans, % of after-tax inc.
$10K-<$30K $30K<I=$50K
>/=$50K
TOTALS
$10K-<$50K
<$50K
>/=$50K
118.7
100.0%
$67,530
16.6%
4.6%
50.6
59.8
50.4%
$24,751
6.7%
2.9%
58.9
49.6%
$111,018
17.8%
6.3%
1.9%
1.0%
5.2%
2.6%
4.0%
$4,764
$18,106
$33,541
58.9
49.6%
$111,018
17.8%
6.3%
$84,263
$1,596
$930
$1,773
$1,083
$2.044
$1,302
$2,554
$1,613
$666
$2,106
$3,702
$690
$2,621
$4,394
$743
$3,705
$5,749
$941
77.7%
24.3%
9.S%
14.5%
17.1%
6.1%
11.0%
9.2
7.8%
28.0
23.6%
$4,906
$19,638
33.5%
44.2%
22.6
19.0%
$39,163
10.4%
$4,953
$7,507
6.9%
3.0%
5.9%
42.6%
$28,370
$53,229
7.5%
3.2%
$25,320
$22,390
$84,263
$2,131
$1,894
$1,648
$2,554
$1.330
$800
$3,957
$1,181
$1,142
$713
$706
$941
$2.951
$4.953
$6,068
$3,105
$4,999
$4,799
$7,507
11.4%
4.0%
7.4%
7.5%
12.3%
21.4%
8.3%
13.2%
8.9%
3.0%
5,9%
19.?t'A>
$1,613
Sources: Population and income data trom U.S. Bureau of the Census, Current Population SUlVey Supp. (2001, 2005, 2011 eds.) Residential energy costs
are based on U.S. DOE Residential Energy Consumption SUlVey (2001,2005 eds.) 2012 projections based on changes in 2005-2012 residential
energy prices from U.S. DOEJEIA Annual Energy Review 2005 and Short-Term Energy Outlook (January 2012). Transportation energy expenditures are
estimated from U.S. DOE/EIA, Household Vehicle Energy Use: Latest and Trends (Nov 2005) and DOElEIA Short~Term Energy Outlook (January 2012).
Gasoline use per household in 2012 is reduced by 6.3% from 20011evels based on data in US DOT 2009 National Highway Transportation Survey.
Average effective federal tax rates are estimated from Congressional Budget Office, Effective Federal Tax Rates Under Current Law, 2001-2014
(August 2004), and Effective Federa! Tax Rates, 1979-2006 (April 2009). State tax rates estimated from w.NW.taxadmin.orglftalratelindjnc.htm!.
73
Summary of Statement of Eugene M. Trisko
Before the Subcommittee on Energy and Environment
June 6, 2012
This testimony summarizes the findings of a study entitled "Energy Cost Impacts on
American Families, 2001-2012." I have conducted this study periodically since 2000 for
the American Coalition for Clean Coal Electricity and its predecessor organizations.
The report analyzes consumer energy costs since 2001 for all u.s. households and
examines the pattem of energy expenditures among four income levels and for senior and
minority families. It relies on historical energy consumption survey data and current
energy price forecasts from the DOE Energy Infonnation Administration (EIA).
Slightly more than one-half of U.S. households have average pre-tax annual incomes
below $50,000. In 2001, families with gross annual incomes below $50,000 spent an
average of 12% oftheir average after-tax income of $21 ,834 on residential and
transportation energy. In 2012, these households are projected to spend 21% of their
average after-tax income of $22,390 on energy.
Family incomes have not kept pace with the rising costs of energy. The U.S. Census
Bureau reports that since 2007, real (inflation-adjusted) median household income has
declined by 6% (from $52,823) and is 7% below the median household income peak
($53,252) that occurred in 1999.
Higher gasoline prices account for nearly four-fifths of the increased cost of energy for
consumers since 2001. In nominal dollars, average U.S. household expenditures for
gasoline will grow by 136% from 2001 to 2012, based on EIA gasoline price projections
for 2012.
Electricity has maintained relatively lower annual average price increases compared to
residential natural gas and gasoline. Electricity prices have increased by 51% in nominal
dollars since 1990, well below the 72% rate of inflation in the Consumer Price Index. The
nominal prices of residential natural gas and gasoline have nearly doubled and tripled,
Virtually all ofthe residential electricity price increases over the past two decades have
occurred since 2000. These increases are due in part to additional capital, operating and
maintenance costs associated with meeting clean air and other environmental standards.
Lower-income families, including millions of fixed-income senior citizens, are more
vulnerable to energy costs than higher-income families because energy represents a larger
portion of their household budgets. In 2010, the median gross income of25.4 million
households with a principal householder aged 65 or older was $31,408, 36% below the
national median household income. Energy is consuming one-fifth or more of the
household incomes of lower- and middle-income families, reducing the amount of
income that can be spent on food, housing, health care, and other necessities.
74
I now recognize Mr. Wolf to present his testimony.
STATEMENT OF MR. TOM WOLF,
EXECUTIVE DIRECTOR, ENERGY COUNCIL,
ILLINOIS CHAMBER OF COMMERCE
Mr. WOLF. Thank you, Mr. Chairman.

My name is Tom Wolf. I am the Executive Director of the Energy
Council at the Illinois Chamber of Commerce. The Council is made
up of companies that generate, transmit, transport energy or supply the energy marketplace. Thank you for the opportunity to give
a little bigger-picture perspective on some of the regulations being
proposed on future greenhouse gas emission sources.
When it comes to the energy regulatory oversight, businesses are
looking for a few general themes. Some of them include predictability, what can and should they plan for; a sweet spot where interestsincluding environmental interestsare protected and commerce can flourish; benchmarks that are based on science and engineering, not wishful thinking; and diversity, allowing everyone a
shot at success so we dont rely too much on one form of energy.
We believe the new rulemaking on greenhouse gas emissions for
new sources proposed by the U.S. EPA falls short of these goals.
Here are a couple of reasons why.
The proposed rulemaking sets a limit which most natural gas
generators can accommodate with todays technology but that coal
generation cannot. It seems a bit strange that this magic limit
saves the planet and just so happens to allow natural gas but not
coal generation. We understand there is a provision in the U.S.
EPA regulations for coal companies to average the greenhouse gas
emissions over 30 years, theoretically allowing them to build a new
plant, retrofit it with sequestration technology when it becomes
availableif and when it becomes available and move forward
that path for new coal could move forward. But that path seems
to run through the installation of carbon capture and sequestration, a technology that is still under development and too expensive
for use today. We hope that changes but it is unclear that it will.
Given that, what company will be able to get financing for a new
plant that is built on the hope that a new technology will be available and affordable at some point in the future? We dont believe
investors would or could take that risk. Lets take a moment to remember how much cleaner coal generation has become in the past
three decades. The Prairie State generation plant in Marissa, Illinois, outside St. Louis on the Illinois side of the Mississippi River
produces 50 percent less regulated emissions and 15 percent less
greenhouse gas emissions using the best available control technology, a great step forward.
However, we believe if these proposed regulations take hold, the
leap coal producers are asked to make in greenhouse gas emissions
will be a roadblock to innovation, not an incentive. The leap being
asked for could result in companies abandoning coal research and
moving to other forms of energy, leaving us more vulnerable with
fewer supply choices.
75
We believe if these regulations are enacted, the cleaner coal technologies will be invented somewhere else, or they wont be invented
at all because other countries that rely on coal are making little
to no effort to minimize greenhouse gas emissions. We are a leader
in cleaner coal technologies today and could be going forward.
I hesitate to try and quantify the exact costs of the proposed
rulemaking that I am going through. If I have learned one thing
in my four years in this position, it is that the future is really hard
to predict. Who could have predicted the natural gasthe new natural gas finds that we found in our country that could turn us into
a natural gas exporter versus an importing one we thought we
would be? Who could have predicted that crude oil from North Dakota, which was 7,500 barrels per day in 2006, is now over 500,000
barrels a day? Who could have predicted that wind turbines would
be 30 percent more efficient than they were three years ago or
solar equipment costs would plummet the way they have?
But unless there is a leap in coal generation technology that is
unforeseen at this time, we believe the rules proposed by the U.S.
EPA and new sources will effectively shut down the future of new
coal generation and the jobs, economic development, and opportunity that would come with it.
In closing, I want to talk about the Prairie State. I took a tour
of Prairie State, talked the lead environmental engineer there and
asked him what he felt about working at that plant and how he
felt about working on the environmental controls. And he said, I
am a kid in a candy store. I reap potential environmental controls
in this plant and I am so proud of working here. We need to make
regulations that inspire him to roll up his sleeves and find the next
innovation that makes coal even cleaner instead of rulemaking that
I believe makes him want to throw up his hands and go, are you
kidding me? We cant do it.
So we suggest taking a long, deep breath, take a hard look at
these new regulations and change them to allow new coal plants
to be built, incentivized in a way that creates a market for the
technological advances that will make coal cleaner and cleaner and
a viable option for United States and global electricity users.
Thank you for this opportunity, Mr. Chairman.
[The prepared statement of Mr. Wolf follows:]
76
r:;i!;\
..,!
ILLINOIS CHAMBER
OF COMMERCE
Testimony of Tom Wolf, Executive Director Energy Council

Illinois Chamber of Commerce
and Benefits of Environmental Regulations
House Subcommittee on Energy and the Environment

June 6,2012
My name is Tom Wolf and I'm the executive director of the Energy Council at the Illinois
Chamber of Commerce. The council is made up of companies that generate, transmit and
transport energy, or supply the energy marketplace. We have voices from worlds of crude oil,
coal, wind, solar, nuclear, waste-to-energy, natural gas, utility and transmission and engineering
interests. The Council's goal is to make Illinois a better place for energy of aU kinds because
that creates economic opportunities of all kinds.
What we're looking for in regulations
When it comes to energy regulatory oversight, businesses are looking for a few general themes:
Predictability - what can and should they plan for?

A sweet spot where interests - including environmental interests -- are protected and
commerce can flourish
Benchmarks that are based on science and engineering, not wishful thinking
Diversity - allowing everyone a shot at success so we don't rely too much on one form
of energy
77
Why we believe the proposed rulemaking falls short
We believe the new rulemaking on green house gas regulations for new energy sources
proposed by the US EPA falls short of these goals. Here are some reasons why:
The proposed rule making sets a limit which most natural gas generators 1ill accommodate with
today's technology - but that coal generation cannot. It seems a bit strange that this magic limit
saves the planet and just so happens to allow natural gas generation but not coal generation.
I know everyone, including the Chamber, is excited about the new natural gas finds across the
country, but it was a few short years ago that we were talking about importing natural gas.
Things change in way we cannot predict - so why preclude a solution that includes new coal
generation?
We understand there is a provision in the EPA regulations for coal companies to average their
GHG emissions over 30 years, theoretically allowing them to build a new plant and retrofit it with
sequestration technology when (and if) it becomes available and economical.
The Administration claims that there is a 'path forward' for coal in this rule. However, the path
seems to run through installation of carbon capture and storage - a technology that is still under
development and too expensive for use today.
Given that, what company will be able to get financing for a new plant that is built on the hope
that new technology will be available and affordable at some point in the future? We don't
believe investors would or could take that risk.
From our perspective these regulations are advocating for natural gas generation and creating a
regulatory wet blanket on future coal production -- in essence, picking winners and losers when
we need nothing but winners.
Let's take a moment to comment on how much cleaner coal production has gotten in the past
three or four decades. The Prairie State generation plant that's just about to become fully
operational in southwestern Illinois produces 50% less regulated emissions and 15% less GHG
emissions using best available control technology - a great step forward.
However, we believe if these proposed regulations come into place, the leap coal producers are
asked to make in GHG emissions will be a roadblock to new innovation, not an incentive. The
leap being asked for could result in companies abandoning coal research and moving to other
forms of energy -leaving us more vulnerable with fewer supply choices.
We agree with the Administration when it talks about the importance of inventing new alternative
energy technologies here in America. But we believe if these regulations are enacted, the
cleaner coal technologies will be invented somewhere else, or they won't be invented at all
2
78
because other countries that rely on coal are making little to no efforts to minimize GHG
emissions. We are a leader in cleaner coal technologies and could be going fOlWard. But
asking for this leap of faith could squash our ability to lead the world.
Finally, the Chamber has a concern that is imperative under the concept of predictability.
Whatever regulations that come out of this process, they should not serve as a precursor to
regulating GHG from existing plants or provide a legal trap door for regulating existing plants
when they are modified with new pollution controls to comply with other regulations. The
USEPA has clearly said that they would not treat modified sources as new and that they had no
plans or timetable for proposing regulations for existing sources.
We ask that you stay true to that commitment as there will be voices pushing you to backtrack
on that promise.
What does this mean for Illinois business and consumers?

I hesitate to try and quantify the exact costs and benefits if this proposed rulemaking is adopted
as is. If I've leamed one thing in my four years in this position is the future is really hard to
predict. Who could have predicted the natural gas finds that might turn us into a natural gas
exporting country instead of an importing one. Who could have predicted that crude oil
production in North Dakota would jump from 7,500 barrels per day in 2006 to more than
700,000 barrels a day today. Who could have predicted that wind turbines would be up to 30%
more efficient than four years ago, or that solar equipment costs would plummet.
However, unless there is a leap in coal generation technology that is unforeseen at this time,
new coal generation will be precluded from being part of the solution when it comes to energy
generation. Remember, coal provides almost half of the power in our state today. These rules
effectively shut down the future of new coal generation and the jobs, economic development
and opportunity that would come with it.
This does have economic ramifications as we believe we are better off with a diversified
portfolio of generation options. Relying on fewer instead of more options puts us in danger of
paying more for electricity, which affects the economy as a whole.
79
Conclusion
In closing the Chamber believes all of the above should mean all of the above - We believe
diversity in our energy portfolio is an important. It seems these regulations push coal aside
instead of forward. Therefore we're going to have to rely on everything but coal in our future
baseload generation since it's hard to imagine anyone willing to invest in a power source that
will be out of compliance before the first kilowatt is generated. We have 25% of the world's coal
reserves. Isn't it worth trying a bit harder to make it part of the future energy mix?
Since the rest of the world is going to continue using coal, shouldn't rulemaking provide
reasonable challenges that drive innovation that can be exported globally and make a. dent in
the C02 emissions this proposal is trying to achieve?
We're afraid these new regulations will thwart, not push, innovation and discourage rather than
encourage a diverse portfolio of generation recourses.
We hope the government would create an environment where all sources of power have the
chance to become more efficient and cleaner. We believe coal should be an important part of
that future and, if regulations allow the industry to continually improve its production methods, it
can provide opportunities for continued advancements and economic opportunity at home and
abroad.
We suggest taking a long, deep breath, and take a hard look at these new regulations and
change them to allow new coal plants 10 be built, incenlivized in a way that creates a market for
the technological advances that will make coal cleaner and cleaner - and a viable option for a
U.S. and global electricity users.
Thank you.
80
I now recognize Mr. David Hudgins for five minutes to present
his testimony.
STATEMENT OF MR. DAVID HUDGINS,
DIRECTOR OF MEMBER AND EXTERNAL RELATIONS,
OLD DOMINION ELECTRIC COOPERATIVE
Mr. HUDGINS. Thank you, Mr. Chairman, Members of the Committee.

Good afternoon. My name is David Hudgins. I am the Director
of Member and External Relations at Old Dominion Electric Cooperative. ODEC is a generation and transmission cooperative
headquartered in Glen Allen, Virginia, which is outside of Richmond. We provide electric power to 11 member-distribution cooperatives in Virginia, Maryland, and Delaware. Among our portfolio of fossil fuel generation, we have a 50 percent ownership in
an 850 megawatt coal-fired plant in Halifax County, Virginia, and
two simple cycle combustion turbines in Virginia and 50 percent of
another one in Maryland.
As an owner of existing fossil fuel generation, and more importantly, as we continue our interest and efforts to develop a coalfired base facility, Cypress Creek Power Station, ODECs decisions
on future generation will be directly and negatively impacted by
the adoption of the New Source Performance Standards for carbon
dioxide, and I very much appreciate the opportunity to speak today
on the EPA proposal or, as I learned over the weekend, the Employment Prevention Agencyi.e., this plant will employ 3,000 construction workers for four years, 225 permanent jobs at the end of
the construction, and that is not including the ripple effect of hundreds of millions of dollars that are going to ripple through the
economy. So it has a material impact on the entire region about the
rules.
But today, I am here to state officially that ODEC has significant
concerns related to the proposal. This rule, the NSPS, is at its core
flawed. EPA fails to provide stated benefits for this rule. The proposed rules standard is set without regard to fuel type, with only
certain natural gas-fired units capable of meeting the proposed
limit without control equipment. Given that there is currently no
commercially available, demonstrated technology capable of removing the required CO2, namely carbon capture and storage from
large coal power plants, this standard mandates fuel choice in lieu
of technologies. The NSPS was never intended to be used to redefine a source or dictate use of one fuel over another. NSPS must
be technologically driven and not enacted to drive an overall national mitigation goal.
Additionally, the EPA, in their efforts to justify this standard, relied on two major assumptions. First, EPA believes that implementation of a currently unachievable CO2 standard for coal will drive
commercial development of the emerging carbon capture technology
to ensure future compliance. Second, the proposed rule presumes
supply of natural gas will be both affordable and readily available
to fuel the significant increase of base load generation in the com-
81
ing decades. ODEC believes both of these assumptions are erroneous.
With regard to carbon capture technology, EPA states in the release of the proposed standard, todays proposal does not interfere
with construction of new coal-fired capacity. EPA is justifying the
standard by providing a 30-year averaging and assuming that fullscale carbon capture technology would be commercially viable within 10 years given current and projected government testing and
demonstration. This averaging requirement alone will preclude any
new coal plants from being built. No company will take the risk to
invest billions of dollars into a power plant in the hopes that carbon capture technology will be developed. Additionally, financial
lending institutions will not lend money to construct a plant without a viable technology to demonstrate compliance. This is a $5 billion investment on behalf of the cooperatives to provide 1,500
megawatts.
There are some demonstration projects involving enhanced oil recovery; however, this Administrations Interagency Task Force on
Carbon Capture noted, only when the financial, economic, technological, legal, and institutional barriers are addressed will carbon
capture be a viable mitigation option. Finding suitable storage
areas, developing pipeline infrastructure, and developing largescale capture technology, in addition to the legal and liability
issues, are significantif not insurmountablehurdles to overcome.
ODEC has been and continues to be a member of the Southeast
Regional Carbon Sequestration Partnership. We recognize the need
for these partnerships to facilitate exploration and expansion of
this Nations technological capabilities. As a Virginia cooperative,
coal has been an abundant, consistent, and economical source of
fuel for development of base load electric generation for many decades. While all of us have seen recent prices of natural gas at alltime lows, EPAs assumption that prices will remain low is extremely short-sighted.
Historically, the U.S. Government has consistently failed to accurately predict future natural gas prices, and world market implications on natural gas pricing are disturbing. Electrical affordability
from natural gas generation is significantly driven by the fuel
price. EPAs proposed standard will effectively eliminate ODECs
choice for affordable base load electric power.
ODEC recognizes that solutions to this countrys power needs in
the future will take resources and innovation. However, this proposed mandate will not drive those solutions. Because of the significant impact it will have on the electric generation industry as
a whole, and more importantly, on ODECs ability to construct new
base load generation that will be affordable for all of our membersowners, ODEC urges the Committee to fully and objectively
examine the source material and this proposed rule. Also, we urge
the Committee to encourage the EPA to withdraw this proposed
rule.
This concludes my testimony and thank you again for the opportunity to speak on this fundamental issue of powering the United
States economy into the future. Thank you.
[The prepared statement of Mr. Hudgins follows:]
82
Comments of
Old Dominion Electric Cooperative
New Source Performance Standards for C02
Presented to
United States House of Representatives

the Subcommittee on Energy and Environment of
the House Committee on Science, Space, and
Technology
Presented by
C. David Hudgins
June 6,2012
Old Dominion Electric Cooperative

420lDominion Boulevard. Glen Allen, Virginia 23060
Tel: 804-747-0592. Fax: 804-747-3742
www.odec.com
83
ODEC TESTIMONY
Good morning. My name is David Hudgins. I am the Director of Member
& External Relations at Old Dominion Electric Cooperative (ODEC). ODEC is a
generation and transmission cooperative, headquartered in Glen Allen, Virginia

providing electric power to its 11 member-distribution electric cooperatives in
Virginia, Maryland, and Delaware. Among our portfolio of fossil fuel generation
assets, ODEC has a fifty percent ownership interest in the 850 MW coal-fired
Clover Power Station, which
is
located in Halifax County, Virginia.
Additionally, ODEC owns and operates two simple cycle combustion turbine
facilities (each 510 MW gas and oil-fired generation) in Virginia and owns fifty
percent of another in Maryland.
As an owner of existing fossil fuel generation, and more importantly as we
continue our interest and efforts to develop a coal-fired base load facility, Cypress
Creek Power Station, ODEC's decisions on future generation will be directly and
negatively impacted by the adoption of the New Source Performance Standards
(NSPS) for carbon dioxide (C02), and I very much appreciate the opportunity to
speak today on the EPA's proposal.
I am here today to state that ODEC has significant concerns related to the
proposal. The proposed NSPS is at its core flawed. EPA fails to provide a stated
84
benefit for this rule. The proposed rule's standard is set without regard to fuel
type, with only certain natural gas-fired units capable of meeting the proposed limit
without control equipment. Given that there is currently no commercially
available, demonstrated technology capable of removing the required CO2, namely
carbon capture & storage (CCS), from large coal-fired power plants, this standard
mandates fuel choice in lieu of technologies.
The NSPS was never intended to be
used to "redefine" a source or dictate use of one fuel over another. NSPS must be
technologically driven and not enacted to drive an overall national mitigation goal.
Additionally, the EPA, in their efforts to justifY this standard, relied on two
major assumptions.
First, EPA believes that implementation of a currently
unachievable CO2 standard for coal will drive commercial development of the
emerging CCS technology to ensure future compliance. Second, the proposed rule
presumes supply of natural gas will be both affordable and readily available to fuel
the significant increase of base load generation in the coming decades.
ODEC
believes both of these assumptions are erroneous.

With regard to CCS technology, EPA states in the release of the proposed
standard, "today's proposal does not interfere with construction of new coal-fired
capacity". EPA is justifYing the standard by providing a 30 year averaging period
and assuming that full scale CCS technology would be commercially viable within
10 years given current and projected government testing and demonstration
85
projects and funding. This averaging requirement alone will preclude any new
coal plants from being built. No company will take the risk to invest billions of
dollars into a power plant in the hopes that CCS technology will be developed.
Additionally, financial lending institutions will not lend money to construct a plant
without a viable technology to demonstrate compliance.
There are some demonstration projects involving enhanced oil recovery
(EOR); however, this administration's Interagency Task Force on Carbon Capture
noted; "only when the financial, economic, technological, legal, and institutional
barriers are addressed will CCS be a viable mitigation option." Finding suitable
storage areas, developing pipeline infrastructure and developing large scale capture
technology, in addition to the legal/liability issues, are significant, if not
insurmountable, hurdles to overcome. ODEC has been and continues to be a
member of the Southeast Regional Carbon Sequestration Partnership (SECARB).
ODEC recognizes the need for these partnerships to facilitate exploration and
expansion of this nation's technological capabilities.
As a Virginia cooperative, coal has been an abundant, consistent, and
economical source of fuel for development of base load electric generation for
many decades. While all of us have seen recent prices of natural gas at all-time
lows, EPA's assumption that prices will remain low is extremely short-sighted.
Historically, the U.S. Government has consistently failed to accurately predict
86
future natural gas prices, and world market implications on natural gas pricing are
disturbing. Electricity affordability from natural gas generation is significantly
driven by the fuel's price. EPA's proposed standard will effectively eliminate
ODEC's choice for affordable baseload electric power.
ODEC recognizes that solutions to this country's power needs in the future
will take resources and innovation. However, this proposed mandate will not drive
those solutions. Because of the significant impact this will have on the electric
generation industry as a whole, and more importantly, on ODEC's ability to
construct new base load generation that will be affordable for all of our member
owners, ODEC urges the committee to fully and objectively examine the source
material and this proposed rule. Also we urge the committee to encourage the EPA
to withdraw this proposed rule.
This concludes my testimony and thank you again for this opportunity to
speak on this fundamental issue of powering the United States economy into the
future.
#####
87
I now recognize our final witness, Mr. Richard Trzupek, for five
minutes to present his testimony.
STATEMENT OF MR. RICHARD TRZUPEK,
PRINCIPAL CONSULTANT,
TRINITY CONSULTANTS
Mr. TRZUPEK. Thank you, Mr. Chairman and Ranking Member

Miller, for the opportunity to testify here today.
I am Rich Trzupek, a chemist and environmental consultant currently employed as Principal Consultant with Trinity Consultants,
Inc. I work in the trenches, as it were, for the small and midsized
companies that do not have their own environmental staff.
You have my written testimony, so I would like to use this time
to highlight a few points.
First, the perception in the regulative community that the EPA
is overly aggressive and overly intrusive is real and in my opinion
justified. When former Region 6 Administrator Dr. Al
Armendarizsorry about thatArmendariz made his famous crucifixion speech, it came as no surprise to those who work on the
industrial side. From an industrial point of view, he honestly expressedalbeit in far-too-colorful languagethe way that most
high-ranking EPA officials view enforcement actions. My experience has been that, at the federal level, intimidation is often as important as compliance.
Second, many parts of the regulatory structure and the federal
permit systems are needlessly cumbersome and complex. Some say
they do what they can to provide help in streamliningTCEQ is
a great examplebut there is little they can do about the parts of
their programs which are subject to U.S. EPA oversight and approval. The complexity the regulatory structure creates more and
more opportunities for noncompliance, which has nothing to do
with exceeding emission limits, but rather strictly about paperwork
and procedures.
The combination of aggressive enforcement, regulatory complexity, and a clunky federal permit system does lead to adverse
economic consequences. I have seen many cases in my career where
the decision not to build a facility in the United States or the decision not to expand an existing facility was heavily influenced by
the regulatory environment. This is not to say that environmental
regulations were the only factor in these decisions but they were
important factors.
Third, I believe it is time for Congress to review the way the U.S.
EPA is allowed to continually redefine its mission, particularly
with respect to the Clean Air Act. Under the Clean Air Act, the
U.S. EPA is allowed to continually redefine what constitutes clean
air by issuing a new ambient air quality standards. By continually
moving the goalposts farther and farther as the air has gotten remarkably cleaner and cleaner, the Agency thus justifies continuing
with less and less actual environmental or human health returns.
The United States now has some of the cleanest air in the world,
and I would respectfully suggest that it is time we acknowledge
that fact and that the Clean Air Act reflects that fact.
88
Fourth, the economic justifications that the U.S. EPA uses when
promulgating new regulations are, in my opinion, seriously flawed.
In my opinion, U.S. EPA both grossly overestimates the economic
benefits of regulations and ignores many economic, societal, and
health consequences on the other side of the ledger. In a way, I
think it is unfortunate that we call the metric value a statistical
life because it tends to imply maybe I can plop down $9 million and
buy a person. What it really is is the net economic productivity of
the average person, how much money he makes, how much he impacts the economy. When you say it is a value of a life it is going
to be insulting no matter the number. I personally think I am
worth more than $9 million over the course of my life. And there
is no way that metric should be used or should be called what it
is as though it was a real value of a life. It is a value of what a
person does and earns in his life.
You will note that all of the above comments are not related to
the U.S. EPA under this or any other administration. These comments would have applied four years ago, eight years ago, 12 years
ago, et cetera. The only real difference over time is that we can
apply the word more each and every year. Regulations get more
complex, the EPA gets more aggressive, economic justifications are
more unbelievable, et cetera.
There is one thing that is unique to the EPA under the current
Administration and that is what I refer to as the regulatory tsunami aimed squarely at the use of coal and power industrial sectors. Through a combination of greenhouse gas limitationswhich
previous witnesses have talked aboutnew permitting requirements, new ambient air quality standards, and new hazardous air
pollution rules, the Agency has made it virtually impossible to
build the new, modern coal-fired generation in the United States
that would replace our aging fleet.
The EPA has thus effectively decided that more and more of the
base load power generation capacity the American depends on will
be natural gas-fired. In the long term, I strongly suspect this will
lead to substantial increases in the cost of electricity and in more
wildly fluctuating power prices.
Thank you again for the opportunity to testify, and please feel
free to call on me again in the future if I can be of assistance to
the Committee.
[The prepared statement of Mr. Trzupek follows:]
89
Committee on Science, Space, & Technology
Energy & Environment Subcommittee
United States House of Representatives
"Cost and Benefits of Environmental Regulations"
Testimony of Ric bard Trzupek
Principal Consultant
Trinity Consultants, Inc.
Wednesday, June 6tb , 2012
WRITTEN
Introduction
Thank you Chairman Harris, Ranking Member Miller and other members of the Subcommittee
for the opportunity to testify on this important topic. I am Richard Trzupek, a chemist and
environmental consultant, currently employed as a Principal Consultant with Trinity Consultants,
Inc. I have been employed in the environmental industry for thirty years, initially as a stack tester
(measuring air pollution emitted by industrial processes) and then as a consultant to industry.
The vast majority of my clients are now, and always have been, small to mid-sized companies
that do not have full-time environmental professionals on staff.
We have made enormous progress in cleaning up the environment in America since the passage
of the Clean Air and Clean Water Acts over forty years ago. Everyone involved in that effort from businesses to environmental groups to everyday Americans - should be proud of what we
have accomplished together. Obviously, the Environmental Protection Agency has played a key
role in that effort as well. However, as our air and water and soil continue to get cleaner year
after year - as the EPA's data clearly shows -the Agency's mission has, in my view,
increasingly morphed from protecting human health and the environment to finding ways to
justify its existence.
I am not one of those who believes that the EPA should be eliminated. Instead, I believe that the
EPA's mission should be redefined to reflect the fact that the environment in America in 2012 is
nothing like what the environment was in 1970. As the law stands today, the EPA has the ability
to continually redefine its mission in many areas and it does so regularly, no matter the
administration is in charge at the time. By continually moving the goalposts further and further
back, and offering increasingly dubious economic justifications for doing so, the Agency creates
the illusion that ever more heavy-handed regulation are necessary and worth the cost.
Working "in the trenches" with the men and women who struggle to comply with this evergrowing, ever more complex body of environmental regulations, I have seen the price that we all
pay not for environmental protection, but rather for environmental puritanism. We pay a price
in terms of jobs lost, in terms of reduced productivity and in terms of opportunities not realized.
Page 1
90
Costs and Benefits - EPA Claims
The EPA routinely claims enormous monetary benefits when promulgating a new regulation.
Typically, these benefits consist of two key components: "premature deaths avoided" and
increased worker productivity due to less lost sick days. "Premature deaths avoided" is the
largest component of the calculation, so I will focus on that.
In calculating the worth of premature deaths avoided, the EPA relies upon the "Value ofa
Statistical Life" (VSL). It currently uses a VSL of about $9 million, which is, to my knowledge,
the highest VSL used by any government agency. The Agency applies this value to each
premature death avoided claimed, whether the theoretical death avoided involves extending an
octogenarian's life by two weeks or a newborn's by seventy five years. The EPA, to my
knowledge, has never said how much the average theoretical life is theoretically extended by the
issuance of a new regulation. They simply claim the full value ofthe "statistical life" for each
"premature death avoided".
For example, the EPA recently claimed the recently promulgated Boiler MACT rule would result
in $22 billion to $54 billion in economic benefits in 2014. This number is almost entirely driven
by the premature deaths avoided metric, which the Agency claims is 2,500 to 6,500 premature
deaths avoided per year.
Even more dubiously, EPA Director Lisa Jackson has claimed the Clean Air regulations are an
investment that returns forty dollars in revenue for each. dollar spent on regulating sources of air
pollution. This figure comes from an EPA study in which the Agency made the following
assertions:
The direct benefits of the Clean Air Actjrom 1970 to 1990 include reduced incidence of a
number of adverse human health effects, improvements in Visibility, and avoided damage to
agricultural crops. Based on the assumptions employed, the estimated economic value ofthese
benefits rangesjrom $5.6 to $49.4 trillion, in 1990 dollars, with a mean, or central tendency
estimate, of$22.2 trillion.
And, further on in the same document:
The direct costs of implementing the Clean Air Actjrom 1970 to 1990, including annual
compliance expenditures in the private sector and program implementation costs in the public
sector, totaled $523 billion in 1990 dollars.
$22.2 trillion divided $523 billion is 42.4, which is where Director Jackson comes up with the 40
to 1 return on investment argument. Consider, however, that between 1970 and 1990, the
aggregate total GDP ofthe United States was $63 trillion. According to EPA logic, the Clean Air
Act alone was responsible for 35% of that economic activity ($22.2 trillion), and perhaps as
much as 78% of it ($49.4 trillion)! It is a ludicrous claim.
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In considering the cost side of the cost-benefit analysis, the Agency typically considers only the
capital cost of control equipment, operating and maintenance costs associated with the
equipment and the man-hour costs of compliance activities. The Agency does not consider other
economic, societal and health costs associated with each regulation and with the body of
regulatory activity as a whole. Examples of these costs include:
Job loss
Heath effects associated with job loss and reduced income
Opportunity costs associated with facilities not built in the US because of the regulatory
burden
Costs passed on to the consumer and the effects that has on quality of life and health
Facilities that move to other countries in whole or in part because the regulatory
environment
Compliance Issues
The most common lament among my clients goes something as follows: "I want to comply. I'm
trying to comply. I just can't figure out what I'm supposed to do." Indeed, helping them figure it
out is the reason they hire someone like me. Compliance with air quality regulations is not
simply a matter of ensuring that emissions from a particular facility do not exceed applicable
EPA standards. That part of compliance is relatively easy to understand in most cases.
But, compliance also involves records and reports and notifications and inspections and tests and
permits and other bureaucratic minutia. Compliance involves EPA inspectors and EPA permit
writers and EPA attorneys. As complex as environmental regulations have gotten, a great many
"violations" these days have nothing to do with pollution, but rather are about paperwork. Yet, in
terms of enforcement, it does not matter if the violation involves pollution or paperwork. If a
company fails to file some obscure notification, or if an over-zealous, inexperienced inspector
doesn't like the way a particular record is being kept, the company is still subject to penalties of
up to $25,000 per day until the error is corrected, as provided for in the Clean Air Act.
The Agency does not typically collect $25,000 per day per violation of the Clean Air Act. But it
frequently wields that legal authority as a cudgel to force a company to accept a lesser - but still
substantial - penalty demand. This is particularly the case when small or mid-sized businesses
are involved. Few have the will or the resources to fight a penalty demand of a hundred thousand
dollars for a paperwork violation, for example. It's not worth it to hire a lawyer to go to battle
with the EPA, especially when the Agency holds the $25,000 per day, per violation threat over
their heads.
Compliance with environmental regulations today is every bit as complex as compliance with tax
code is for many Americans. It is an increasingly stressful burden on many businesses, in terms
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of both the time spent on trying to stay in compliance with an ever-growing body of regulations
and in terms ofthe way that overly-aggressive regulators can suppress the entrepreneurial spirit.
Let me give you an example of the latter phenomena. "Renewable Energy" is all the rage today
and everyone is looking for new sources of renewable fuels. One source of renewable fuels is
one of the oldest fuel sources on earth: human waste, in the form of sewage sludge. Dried
sewage sludge is very similar to lignite (a form of coal) in terms of both fuel value and air
pollutant characteristics. Since it's not a fossil fuel, the combustion of sewage sludge does not
add any additional carbon to the eco-system. So, rather than landfill it, land-apply it, or
incinerate it (the three most popular disposal options today), why not recover the energy
contained in sewage sludge? In some cases the EPA agrees, having recently approved of the use
of dried sewage sludge as a supplementary fuel in coal-fired boilers.
One of my clients, Uzelac Industries, manufactures some of the driers that are used to dry
sewage sludge for use as a supplementary fuel. Uzelac is a small, entrepreneurial metal
fabrication ship located just outside of Milwaukee in Greendale, Wisconsin. The owner, Michael
Uzelac, had an inspiration: rather than bum natural gas (a fossil fuel) to dry the sludge, why not
use some of the dried sludge itself to d(l the job?
Unfortunately, EPA decided that burning dried sludge to operate the drier would be
"incineration" and thus subject to an entirely different - and much more intrusive - set ofrules
than a coal boiler using the sludge as supplemental fuel would be subject to. Why? Because,
according to the Agency, if you bum the sludge at the same site where it was produced, it's a
waste and then burning it is incineration. If you bum the sludge somewhere else, it's a fuel and
then burning it is not incineration. When this decision was related to us, my flip response was
"so, if! load the dried sludge on a truck and drive it around the block, does it become a fuel?"
These kinds of tortuous, illogical regulatory analyses are a hallmark ofthe EPA today. The
Department of Energy, the current administration and the American people may want innovation
and new technologies, but the EPA hates dealing with them and the current regulatory structure
is terribly unsuited to doing so.
The Permit System
The permit system has two parts: tbe state (or other local, independent district) level and the
federal level. In most cases, there are two types of permits that must be obtained: a construction
permit, which is required before a new plant or process can be built, and an operating permit,
which is required for continuing operation of the plant or process. Construction permit programs
carry with them the most significant economic impacts, so I will focus on those programs here.
In general, the states are responsible for permitting smaller sources, while the states and the feds
both get involved in permitting larger sources. At the state level, performance varies. Some states
are very business friendly and work hard to push reasonable permits through quickly. Texas is an
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excellent example of such a state. The TCEQ has an enviable reputation for working with
industry, without compromising environmental protection. Other states are much more difficult
to work with. Permits in some states take far too long to obtain and, when issued, are often
Jittered with needlessly intrusive conditions that do nothing to protect the environment.
At the federal level, the permit program is much more complex. Major sources must go through
the EPA's Prevention of Significant Deterioration (PSD) permit program. The PSD permitting
process is fraught with peril and, as currently constituted, frequently results in the cancellation of
projects that would otherwise modernize American infrastructure and further advance the
remarkable environmental progress we have made.
The PSD program started with a good idea: as large sources of air pollution are replaced in the
natural capital equipment life-cycle, let's make sure that the project includes state of the art
controls. It makes sense to require a facility to install a $ I 0 million control device as part of a
$500 million capital project to build a brand new plant that's going to be around for forty years.
It doesn't make sense to require a facility that's on its last legs to make the same investment.
Thus, as fleets turned over, the air in the natural scheme of things, emissions would continue to
drop.
That's what PSD was supposed to be. Perversely, it's had exactly the opposite effect in some big
industries. Take our coal fleet, for example. Director Jackson is on-record chiding utility
operators for running inefficient boilers that are forty years old or lJlore. The implication being
that nobody tried to replace those old inefficient boilers with newer, more efficient boilers. That
is simply not true.
The Sierra Club has a portion of its website dedicated to its "Beyond Coal" program. In it, the
organization proudly records the tens of thousands of megawatts of new, more efficient coalfired boiler construction projects it has helped to kill. Those are the boilers that should have
replaced the older boilers in the fleet and they would have, had organizations like the Sierra Club
not prevented them from being built. And, the PSD program is the weapon that organization\s
like the Sierra Club and NRDC use to kill projects they don't like. They flood agencies with
public comments that, under PSD, the agencies are bound to read and respond to. They file
appeals, both in the judicial system and with the Environmental Appeals Board. In the latter case,
just filing an appeal- whether it has merit or not - automatically stays the permit.
PSD is thus used to throw obstacle after obstacle in the way of new projects. The goal is to so
frustrate a developer that he or she will eventually abandon the project. Since capital has a shelflife, opposition groups like the Sierra Club are often remarkably successful utilizing this strategy.
Ultimately, the combination ofPSD and well-healed, aggressive opposition groups are the reason
that we haven't built a new oil refinery in the United States since 1975, and that we instead rely
on an aging refineries instead. It's also the reason that we have so many old coal-boilers
chugging along. This kind of activity doesn't do the environment any good and it's hardly sound
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economic policy. We need to find a way to go back and make PSD do what it was intended to
do.
Recent Regulatory Developments
In the course of the last four years, the EPA has effectively banned the construction of any new,
modem coal fired power plants in the United States. This has been accomplished not by the
passage of a single regulation, but by the passage of multiple regulations that clearly target coalfired power in what I have corne to think of as a regulatory tsunami. Some of the key regulations
promulgated include:
A New, Short Term Ambient Air Standardfor Nitrogen Dioxide This standard was put in
place in addition to the existing annual Nitrogen Dioxide standard. The short tenn
standard is so stringent that it is virtually impossible for a new coal fired power plant not
to violate it. And, since new power plants are required to perfonn computer dispersion
modeling to show that emissions won't exceed ambient air quality standards anywhere,
under any conceivable weather conditions, this standard effectively prevents the
construction of new, modem, efficient coal-fired generation to replace our aging fleet of
coal boilers.
A New, Short Term Standardfor Sulfur Dioxide Again, the standard is so low that it is
virtually impossible for new coal-fired generation not to violate it, even with state of the
art controls.
Greenhouse Gas Permitting Large new sources of greenhouse gases must go through the
EPA's major source, PSD construction pennit program. As part ofPSD permitting,
sources must show that the controls used to reduce target air pollutants meet the
definition of Best Available Control Technology (BACT). The EPA has made it clear,
through guidance documents, that a coal-fired power plant will not pass the "BACT test"
unless it uses Carbon Capture and Sequestration (CSS) to control greenhouse gas
emissions. Since CSS technology is neither feasible nor affordable in large scale, this
program also prevents the construction of new, modem, efficient coal-fired generation to
replace our aging fleet.
Greenhouse Gas New Source Performance Standards The EPA recently published a
New Source Performance Standard (NSPS) for Greenhouse Gas emissions from Electric
Generating Units (EGU). No coal-fired power plant can meet that standard without the
use of CSS, which - as noted above - is neither technically feasible nor affordable in
large scale. Combined cycle, natural gas-fired power plants are capable of meeting the
standard.
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Utility MACT & Boiler MACTMaximum Achievable Control Technology (MACT)

standards are supposed to be about minimizing emissions of Hazardous Air Pollutants
(or "HAPs", as opposed to the more common Criteria Air Pollutants). What the EPA has
done in establishing MACT standards for large EGUs (Utility MACT) and industrial
boilers (Boiler MACT) goes far beyond this goal. The standards themselves are
incredibly stringent and that alone will hasten the retirement of many coal-fin:d assets in
the United States. As troubling are provisions in the rules that will involve the EPA
much more closely than ever in operation of the EGU's and boilers that remain. There
are requirements to conduct periodic tune-ups and energy efficiency audits within the
rules. Now, there is nothing wrong with tuning up boilers and conducing energy
efficiency audits. Indeed, most companies do so on their own, because there is a
monetary incentive to minimize energy use. But, involving the EPA in the process is
foolish, overly intrusive and will be counter-productive in many cases. Inexperienced,
over-zealous EPA officials at the federal and state levels often make foolish and counterproductive decisions about the pollution control systems that are within their purview
today. A rule that gives them the opportunity to interfere at the operational level as
these rules clearly do - is a recipe for disaster.
It should also be noted that EPA officials are using threat of enforcement action to force smaller
coal-fired boilers, such as municipal boilers or those operated by co-ops, to shut down or convert
their boilers to fire another fuel (typically natural gas or biomass). Given the relatively small size
of these units and the entities that operate them, and given EPA's spectacular, multi-million
dollar successes in going after larger utility boilers, few - if any - operators of these smaller
boilers would dare to fight the Agency.
All of these regulatory actions, and many more, mean that the coal fleet in the United States will
continue to shrink and no new coal-fired plants will be built to replace retired units. Construction
of new natural gas fired generation is the only possible way to replace that base-load capacity
without endangering the reliability of the grid. (Nuclear plants, even if permitted, cannot be built
quickly enough; wind power is nowhere near reliable enough to provide base-load capacity; and
solar plants are also terribly unreliable and the size of even the largest solar plants are pitifully
small compared to the size of the coal-fired plants that will be retired).
At the moment, natural gas is plentiful and relatively cheap. Thus, repowering will likely be
relatively painless in the short term. However, natural gas prices are historically much more
volatile than coal prices. The natural gas industry which is doing a tremendous job in my
opinion - will find and create new markets for their product. Prices will eventually rise again and
this will have a much more significant effect on the cost of electricity than is currently the case.
We are thus in the midst of the monumental shift in the way that America generates its electric
power. Dreams of supposedly "free" wind and solar power make for good talking points and
heart-warming commercials, but there is little substance to found in those dreams from a science
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and engineering point of view. According to Department of Energy Data, both solar plants and
wind farms generate less than 20% of the power they are designed to produce. One cannot run an
electric grid by relying on sources that we can't count on over 80% of the time.
As a practical matter, the only sources of power that are both abundant enough and reliable
enough to provide the base-load generation that is critical to maintaining a healthy grid are coal,
nuclear and natural gas. Through a series of regulatory initiatives, the EPA has effectively
decided that natural gas will be the fuel of choice in the years to come. Not Congress. Not the
free market. That decision has been made by the Agency alone. I cannot say whether Congresses
past intended to grant the EPA the authority to make such a decision when the original Clean Air
Act and the Clean Air Act Amendments of 1990 were passed, but it is clear that this EPA
believes it has that authority. If the EPA is going to decide energy policy to this extent, I would
hope - as a private citizen - that someone takes a closer look at their decision-making process.
Conclusion
In conclusion, as I have stated in my testimony, the EPA continues to have a greater and greater
effect on industry, energy production and economic activity in general, with increasingly smaller
environmental returns. It's been twenty two years since Congress has taken a fresh look at the
Clean Air Act. It's time to do so again.
Thank you again for the opportunity to testify before the committee.
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I thank the witnesses for being available for questioning today,
reminding Members that Committee rules limit questioning to five
minutes.
The Chair at this point will open the round of questioning and
I recognize myself for five minutes.
Mr. Trzupek, let me just follow up on that regulatory tsunami.
I am sure you are aware, as everyone in the public is, you know,
we have this 2,700-page Affordable Care Act bill and a whole bunch
of rules and regulations have to come from it. Are you aware that
there are twice as many regulations from the EPA as there are
from Health and Human Services before OIRA right now, despite
the fact that HHS has to implement a 2,700-page health bill that
involves 17 percent of the U.S. economy, twice as many? Would
that surprise you?
Mr. TRZUPEK. That frightens me.
Chairman HARRIS. It wouldnt surprise. I didnt think it would.
With regards to this statistical life, that is kind of related to the
quality adjusted life, which is, if I recall, Ezekiel Emanuel, the advisor to the President, is the one that introduced that concept in
regards to how to ration medical care as we go to look to decrease
the costs of Medicare in the future. Am I correct? I mean it is the
same concept that in fact older lives somehow dont get the same
amount of resources as younger lives?
Mr. TRZUPEK. Yeah, that is correct.
Chairman HARRIS. Right, that was Ezekiel Emanuelsthe whole
point of his pretty famous paper.
Now, Dr. Honeycutt, let me ask you some questions. I am going
to ask youcan we show the slides here? Because I am going to
show thisthese are some of your slides here that you didnt
present, but they are in the written testimony. Now, the first one
suggestsbecause, you know, in science you like to think we kind
of, you know, seek the truth. Apparently, the truth before pre-2009
appeared to be that maybe four percent of all deaths was due to
PM2, but the truth somehow changed post-2009 and all of a sudden
four times as many deaths. One of those sciences is wrong, right?
I mean we have to assume that no cataclysmic event occurred in
2009 except maybe the beginning of a new administration that
would have quadrupled the number of deaths attributable to PM2,
is thatthat is kind of correct?
Dr. HONEYCUTT. Yes.
Chairman HARRIS. Right? Okay. Now, lets go to the next slide,
which I think is one that you showed. When I took my masters degree at the School of Public Health, the first thing they taught us
in the statistics course is before you do any statistics you actually
look at the data. Now, I look at this data and if you took that line
that is vertical which really is nothing, that is just, you know, that
.15, and you looked at that data and I asked someone to draw the
best lineto imagine that a line describes this data or even a curve
describes this data, one would look at it and go, well, you really
cant because with those outliers there on the right you could say,
well, I could draw a line going downward with those outliers on the
left. Well, maybe it is straight across.
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So the first validation of any statistical analysis is look at it and
say should you subject this statistical analysis? I got to you tell
you, I look at this, I say I am not sure I would. Lets go to the next
slide.
And that is true, right? Is thatthat is the way you are supposed to deal with statistics?
Dr. HONEYCUTT. You are absolutely correct.
Chairman HARRIS. This is the assumption of causality. Now, this
is the most worrisome because what you are suggestingand I
wish, you know, Cass Sunstein were here and God bless him on the
birth of a daughter. I have two daughters. You know, he is going
to have his hands full and three otherthree boys. He is going to
have his hands full for a while. But the research was an association.
Dr. HONEYCUTT. Absolutely.
Chairman HARRIS. Which they teach you in epidemiology should
never be attributed to causality until you do actual studies that
prove causality, is that correct?
Dr. HONEYCUTT. Yes, sir.
Chairman HARRIS. Okay. Now, this is the assumption of causality, and even if you assume causality, this is where you say most
of the studiesbecause that line above the number one assumes
that there is no effectmost of those studies fall on that line and
only one study if I look at it doesnt have an estimatea range of
estimateof accuracy of estimate that actually doesnt touch the
line one.
Dr. HONEYCUTT. Yes, sir. It is very
Chairman HARRIS. So the assumption looking at that data would
be there is actually no evidence that there is an increase in relative
risk.
Dr. HONEYCUTT. There is very little.
Chairman HARRIS. In fact, the studies you showed indicate there
is a 1.06. I imagine that study actually included 1 as part of the
range.
Dr. HONEYCUTT. Actually, it didnt. It was very close to 1.
Chairman HARRIS. Well, you said there were two studies, 1.06
and 1.16, but I dont see two that dont touch the line of 1, maybe
1.16 that did it. That is what I thought.
Next slide.
This one is very interesting, because it assumes that if you want
to live a longer life in Dallas and in Houston, you better start
breathing some PM2
Chairman HARRIS [continuing]. Is that right?
Chairman HARRIS. Because using the same association and the
same causality information to say that actually your risk is decreased in Dallas and Houston and Birmingham and I know Las
Vegas crosses the 1. And actually, there are only very few cities
where there is even a slight increase. You know, maybe in Phoenix
and Milwaukee it might not be hazardous, but that could outweigh
Dallas and Houston.
As far as you know, does the EPAdid they change the requirements for Dallas and Houston based on this scientific data?
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Dr. HONEYCUTT. No, sir. We have the same requirements everyone else does.
Chairman HARRIS. You do? Even though the evidence is that in
Texas it appears to be protective?
Chairman HARRIS. Okay. That is kind of what I thought. Anyway, thank you very much. We will get a second round, be sure to
get some more in. And I now recognize the Ranking Member, Mr.
Miller, for five minutes.
Mr. MILLER. Thank you, Mr. Chairman.
That set of questions make it all the more remarkable that no
one from EPA was invited to appear at this hearing because these
analyses are done by EPA; they are not done by OIRA. It certainly
would have been useful to have had someone here from EPA to ask
some of those very particular questions that the Chairman was just
asking.
The reason that I set out verbatim in my opening statement the
Chairmans question to Cass Sunstein last fall is I did not want to
summarize the position he was taking since it was, as they say in
Jeopardy, in the form of a question. But let me put this innocentalthough it pretty clearly is implicit in the questionfor purposes of this question, if your position is that EPA should value life
not by life but by years, and that if an environmental exposure
lessens life by a percentage and therefore it is more years for
younger people, then if that is your analysis, then you are saying,
yes, younger peoples lives should count for more than older peoples lives.
Given that assumption, Mr. Honeycutt, could you answer this
question? In spite of the fact of that most mortality associated with
particulate matter happens in the population over 65 years of age,
EPA puts the same value on the mortality for all ages. In your
view, is this practice appropriate?
Dr. HONEYCUTT. No, sir.
Mr. MILLER. That is not appropriate?
Dr. HONEYCUTT. No, sir.
Mr. MILLER. Okay. You do believe that younger lives should
count for more than older lives? There should be a senior discount?
Dr. HONEYCUTT. Actually, the lives should be the same. It is the
life years that needs to be different because actually the rules impact
Mr. MILLER. Right.
Dr. HONEYCUTT [continuing]. People mainly 80 and over.
Mr. MILLER. So you were
Dr. HONEYCUTT. So it adds months to their lives. So a 25-yearold, if he lives past 25 years oldif this were infant mortality, you
would be correct. You would use a whole life. But we are talking
adding lives to people who are over 80 or adding yearsmonths to
the lives of people who are over 80.
Mr. MILLER. Okay. So you are, again, the gist out of the analysis
that you get there is that the life of a younger person should count
for more than a life of an older person?
Dr. HONEYCUTT. Well, they should count equally because a 25year-oldhis value of a statistical lifeit should be the same no
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matter what. But an 80-year-old who dies four months sooner than
they would have, they have only lost that four months.
Mr. MILLER. All right. Thank you, Dr. Honeycutt.
Dr. Honeycutt, there is a pretty clearly established legal concept
that there can be many causes, but if they act in concert they are
allthat each one is a cause. Do you dispute that in any way? I
mean, if someone is obese and a smoker and is exposed to particulate matter or any other kind of environmental exposure and that
combination had not existed they would have survived, then each
one of those is a cause.
Dr. HONEYCUTT. Each one can contribute. The question is how
much do they contribute? And I think the answer is those other
factors contribute a lot more than PM does if PM does at all.
Mr. MILLER. Okay. I understand the whole idea of double counting is that thethat two different rules may accomplish the same
purpose and if you count it the same for both, you are double
counting. But it is certainly possible to have discrete benefits from
two different rules, and it is possible to have a cumulative effect
from two different rules. Your slides suggest that there has been
double counting but there is absolutely noyou cite no authority
for that at all. What is your authority for the EPA double counting
the benefits of air pollution controls, for instance?
Dr. HONEYCUTT. Well, I mean it is taken directly from EPA analysis because when you reduceif a rule reduces PM by a
microgram per cubic meter and another one does, it is reducing the
same microgram per cubic meter.
Mr. MILLER. Why is it not 2 micrograms per cubic meter?
Dr. HONEYCUTT. Because it looks at what
Mr. MILLER. How do you know it is the same microgram?
Dr. HONEYCUTT. Because you are measuringif you are measuring at a monitorsee, these arent looking at sources; they are
looking at monitors in the environment, monitors at a city. So if
it is reduced at a monitor somewhere, it doesnt really matter
where it came from. It is reduced at the monitor. That is the different between an ambient standard and a point force standard.
Mr. MILLER. Right. But you have offered no authority. Is there
any authorityis there any published paper that shows that they
are actually double counting rather than there being discrete benefit or cumulative benefit?
Dr. HONEYCUTT. I am not sure about a published paper on that,
but you can actually just look at EPAs data and pull that information out. It is there. I would be happy to show you that.
Dr. MILLER. Okay. Well, even better would be to have an EPA
witness come and have that person ask those questions.
My time has almost expired and I will yield back the last 15 seconds.
Chairman HARRIS. Thank you. I think you are actually 15 in the
red, but we will give youremember, we are going to have another
five minutes. And gosh, I kind of wish that the minority had invited the EPA. I would love to hear their explanation.
Mrs. Biggert is recognized, the gentlelady from Illinois, for five
minutes.
Mrs. BIGGERT. And thank you, Mr. Chairman.
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Mr. Wolf, you recently testified at a public hearing in Chicago on
EPAs proposed carbon pollution standard. Do you think that based
upon recent EPA behavior, the Agency is likely to incorporate and
respond to your concerns in the final standards?
Mr. WOLF. I hate to predict the future of what government agencies do. I certainly hope that they will take a look at this. The industryyou know, I represent a lot of different voices in the industry in Illinoiswind, solar, coal, nuclear, crude oil, utilitiesit is
not like they are against every regulation in the book. They would
like regulations that they believe allow a sweet spot for that environmental protection and a successful business model. And I am
hoping the U.S. EPA looks at this specific one and has a path for
coal that really is a path for coal and not a roadblock.
Mrs. BIGGERT. Okay. Then, do you think that the recent EPA
regulatory activity is consistent with the all-of-the-above energy
policy?
Mr. WOLF. I think this proposal is not consistent with that. I
think this proposal does preclude coalnew coal generation from
happening. The coal producers and actually some of the other producers of energy I have talked to about these regulations, people
arent even in the coal business, some of the wind people I talk to
look at this and say, yeah, they are not going to be able to build
with this. It is just too much of a leap. Where they say
incentivization for maybe permitting incentivizations, a renewed
permit is X percent cleaner for greenhouse gas gives that incentive
as an idea to get better and better and cleaner and cleaner over
time. If you just say here is this big bar you have to reach and they
cant reach it, they arent even going to try to get there.
Mrs. BIGGERT. I know that in Illinois there was sequestration
that was talked about for a long time in southern Illinois which
has not happened, but it seems like there has been some breakthrough on the greenhouse gases for coal. I thought that they really hadin some of the plants had been able to remove that from
there.
Mr. WOLF. Well, on the sequestration side there is actually a
pilot project going on in Decatur right now
Mrs. BIGGERT. Yeah.
Mr. WOLF [continuing]. Where they are sequestering a million
metric tons over three years and we are hopeful that pilot project
will prove successful both technologically and environmentally and
economically. But again we are not sure.
Mrs. BIGGERT. So it is moving forward?
Mr. WOLF. It is moving forward but there are a lot of ifs in that
scenario and to sayto put out regulation that says every if is
going to work out; therefore, lets do it this way is grasping. And
then, you know, there isI think the coal industry has shown over
the past three decades that it can get better. And that is in their
hands and saying we are done. This is it. This is the best we can
do. Consistently, they are showing they can get cleaner and cleaner
in their energy and production and we should give them that
chance to continue that.
Mrs. BIGGERT. Okay. Then, Mr. Trzupek, what are the cumulative effects of these various EPA rules on the bottom line for
small businesses?
102
Mr. TRZUPEK. For small businesses they have a very marked effect on the bottom line. In the small entrepreneurial businesses
that I deal with, the person who is trying to manage the EPA program is usually the driving force in that business; he is the entrepreneur. And the more time he has to spend doing things that really dont have environmental benefit, they are just about paperwork
and procedures, the less time he is being productive, the less time
he has to devote to growing his business.
Mrs. BIGGERT. And do you think that the EPAs carbon pollution
standard that will effectively ban coal generation will impact the
manufacturers and small businesses?
Mr. TRZUPEK. I think in the long term because coal has been for
years the great stabilizer in energy prices and natural gas, as I
think Mr. Hudgins pointed out, historically fluctuates a lot and if
you dont have certainty on energy prices, that is definitely going
to affect my clientele.
Mrs. BIGGERT. Okay.
And Mr. Trisko, what impact will the recently proposed and finalized rules on the power sector have on coalmining and
coalminers?
Mr. TRISKO. Thethank you, Mr. Wolf.
Mrs. BIGGERT. Mr. Trisko, yeah.
Mr. TRISKO. Yes. Thank you. The most recent economic impact
analysis of the impact of the EPA Mercury and Air Toxics Standards Rule sponsored by ACCCE is prepared by National Economic
Research Associates. I could briefly summarize those job results because your hearing is focused in part on the impact of these rules
on jobs. Now, this is not broken down for coalmining jobs.
Coalmining jobs obviously are kind of first in line. They are the
first to be lost in this process followed by losses in the utility sector, the railroad sector, and so forth. There are, of course, some offsetting job gains in constructionconstruction of pollution controls
and the like.
The NERA study of the MATS ruleand this is prepared, dated
March 21, 2012, so it was prepared after the final rule was promulgated and it is focused only on the MATS rule and compares that
rule relative to two baselines; first, a CAIR baseline, the Clean Air
Interstate Rule, which is in effect today pending the courts stay of
CSAPR; and then second, a baseline of the CSAPR rule assuming
that that is implemented at some point. And in sum, the estimate
of the net job impacts for the two rules are a net loss of 215,000
permanent full-time equivalent jobs for the MATS rule plus CSAPR
relative to a CAIR baseline. So it is a net loss, 215,000 permanent
jobs.
Mrs. BIGGERT. Okay.
Mr. TRISKO. When you compare the MATS rule relative to the
CSAPR transport rule, the estimate is for a net loss of 180,000 permanent full-time jobs. ACCCE would like permission to submit this
study for the record following the conclusion of this hearing because all of the assumptions underlying the findings I have just
summarized are contained therein.
Mrs. BIGGERT. Mr. Chairman, I would ask that the study be submitted for the record.
Chairman HARRIS. Without objection, so ordered.
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[The information may be found in Appendix 2.]
Chairman HARRIS. Thank you. The gentlelady yields back her
time.
We have enough time for a second round of questioning ifand
I will begin a second round of five minutes of questions.
If we can show one of theshow the slides. You can put them
upand this slide right here. I finally found that other box that
didnt intersect with zero because it is so close to the line of 1 you
cant see it. The two studies with the lines are the Laden study
from 2006, the Pope study from 2002 which actually forms the
basis of $1.8 trillion of the $2 trillion benefit claimed by EPA, the
economic benefit. Now, my reading of that slide shows that both
those overlap the relative risk of 1. Is that true?
Dr. HONEYCUTT. Well, sir, there
Chairman HARRIS. Or are they just really, really darn close?
Dr. HONEYCUTT. They are very close.
Chairman HARRIS. Okay. And just to put it into perspective, is
it true that smoking increasesthe relative risk of smoking is
about 2.8 times?
Chairman HARRIS. So you are looking at maybe two, three percent increase versus a 280 percent increase180 percent increase
Chairman HARRIS [continuing]. In those? Okay. And that is 1.8
trillion of the 2 trillion. That is how really you get to 30 to 1
Dr. HONEYCUTT. Sure.
Chairman HARRIS. Do you know if meta-analysis has been conducted on those to actually increase the power of it to see if when
you put all of those studies together they intersectthey overlap
1?
Dr. HONEYCUTT. Yes, sir. A meta-analysis has been done. The
problem is one of those studies has over a million people in it.
Chairman HARRIS. I got you. So it weighsyou are right. It overweighs in the meta-analysis. I understand that.
Look, I am sorry that the EPA isnt here to testify, but to be honest with you, we have been waiting since September. We were
promised bypersonally, Gina McCarthy promised me to send that
data that justifies that from those two studies and the data. And
Mr. Holden appeared and Mr. Smith asked himhe promised he
would send it. We have been waiting for, you know, seven or eight
months. I understand the EPA is busy writing regulations and
doing other things but they should have some time to respond to
Congress when we ask those kind of questions.
Now, Mr. Hudgins, Cypress Creek Power Station, that base facility you are talking about that would bewould help provide electricity into my district for Choptank Electric. You know, you stated
that your decisions on the base load facility it will be directly and
negatively impacted by the new carbon pollution standard for
power plants despite the Agencys claim that there is zero cost associated with the rule. We are going to have Lisa Jacksonif she
appearstestifying in this room at the end of the month and she
has claimed that this rule wont kill coal due to flexibilities included and the ability to incorporate carbon capture and sequestra-
104
tion in 10 years. My assumption from your testimony is that you
are notyou dont really agree that that is necessarily true. Obviously, you probably would have gone ahead and built the facility.
Mr. HUDGINS. Mr. Chairman, at the end of the day, this whole
process of billions of dollars is driven by the financial institutions
that we deal with, Wall Street. And one thing that bankers do not
want is uncertainty.
Chairman HARRIS. Right. I should say it is actually the financiers who really dont trust that that is a stable, financially
sound decision to
Mr. HUDGINS. Take a $5 billion risk
Chairman HARRIS. Right, on the fact that, for instance, carbon
and we know because we have had testimony in front of this Committee that carbon capture and sequestration, the demonstration
projects actually arenthavent been done. They are just not scalable. They are really not financially feasible and yet we still hear
that that is true.
The prediction of energy costsbecause I guess Lisa Jackson
bases that on ayou know, a $250 million BTU cost of natural gas
but the EIA estimateand, you know, you have to trust the EIA
at some pointare you aware of what their estimate was for this
years cost of natural gas two years ago?
Mr. HUDGINS. I am not.
Chairman HARRIS. It is 4.50. It is actually 2.50. The government
is only off by a factor of 80 percent in that estimate. Do you have
any reason to believe that the government will be able to predict
or that Ms. Jackson is able to predict the cost of natural gas? And
is that, in fact, part of the basis for the decision to say that, you
know, coal really might bethe price stability of coal might be the
most dependable way to go if these rules werent in place?
Mr. HUDGINS. Mr. Chairman, sometimes we go to use common
sense and every time you have a
Chairman HARRIS. This is Washington, DC. I beg to differ.
Mr. HUDGINS. I understand, but at the end of the day, it is about
monopoly and if we are forced as a utility into the gas market as
to be the sole supplier of gasI mean of electricity from gas, then
what is going to happen to a price in any monopoly? And we can
point to our history when the monopoly occurs, prices rise.
Chairman HARRIS. Sure.
Mr. HUDGINS. And what we were fearful of three, four years ago,
gas was at almost $14 MCF.
Chairman HARRIS. You are absolutely right, and we have a long
history of the stability of coal prices.
Mr. Trisko, can you add to that?
Mr. TRISKO. Yes, Dr. Harris. Given your penchant for statistical
analysis, I think you would be interested to find that the EIAs
analysis of the NYMEX future natural gas contract that appears on
the short-term energy outlook Web page for DOE contains a tab
called probability analysis. And if you click that tab on probability,
you will find the 95 percent confidence intervals for the NYMEX
December 2013 natural gas contract. It gives the reference case
projection and then the 95 percent confidence intervals around that
projection. Now, that is a contract price that is 18 months hence
and EIAs 95 percent confidence interval is between a range of
105
slightly less than $2 per million BTU and slightly less than $8 per
million BTU.
Chairman HARRIS. Only a four-fold range.
Mr. TRISKO. Yeah.
Chairman HARRIS. Easy to predict I guess. Listen, thank you
very much and I deferI recognize the Ranking Member, Mr. Miller, for a second round of questions.
Mr. MILLER. Thank you, Mr. Chairman. Among the 17 documents that I earlier asked to be included in the record and do not
yet have a ruling on, almost all of them are letters from groups
that have an opinion, have a point of view on this topic. I have
never known an organization that has a point of view on a topic
that is before a Congressional Committee being denied the right to
have their views included in the record.
Some clippings, articles, and various publications, and only a
couple of at all detailed technical kinds of documents, one of which
is Summary of Expert Opinions on the Existence of a Threshold
and the Concentration Response Function for PM-related Mortality,
technical support document. This is published by the EPA, was
compiled by the EPA. It includes several participants, some of
which I have heard of like the American Heart Association, some
of which I have not heard of but the list of authors of their papers
is long, and their credentials appear impressive and in every case
they have an equally long and equally impressive list of peer reviewers. It is pretty stunning to me to think that the majority staff
does not know about this, did not know about this document well
before last night in preparing for this hearing because this seems
to be a pretty basic document.
Dr. Honeycutt, are you familiar with this document?
Dr. HONEYCUTT. I am familiar with most of the statements in it.
Mr. MILLER. Well, are you familiar with the list of scientists who
participated in one way or another either as authors or aswell,
some list authors and peer reviews; some list experts, but those
this list of scientists who participated in preparation of this document?
Mr. MILLER. You are familiar with that list? Okay. Well, you
have criticized the EPA, including in your testimony today, as
being secretive, not telling you what their analysis is. This seems
pretty open.
Dr. HONEYCUTT. Well, actually, the data underlying their analysis is not available.
Mr. MILLER. Was that data provided to this list ofit looks like
probably a couple hundred scientists?
Dr. HONEYCUTT. No, it wasnt. That data is held by a couple of
universities and only the university professors have access to the
data.
Mr. MILLER. I am sorry. The data is not provided to peer reviewers?
Dr. HONEYCUTT. That is correct. Only the analysis of the data is.
Mr. MILLER. The people whothe scientists who agree to be peer
reviewers are not seeing the data upon which they are
Dr. HONEYCUTT. You are absolutely correct.
106
Mr. MILLER. I am not correct. I am not saying it. I am asking
you.
Dr. HONEYCUTT. Your statement is correct.
Mr. MILLER. Okay. But that is what you are saying. All right.
And so you disagree with the statement by the EPA that studies
demonstrated an association between premature mortality and fine
particulate pollution at the lowest levels measured in the relevant
studies levels that are significantly below the NAAQS for fine particles. These studies have not observed a level at which premature
mortality effects do not occur. You say that is not supported by
data or by scientific analysis?
Dr. HONEYCUTT. Oh, no, sir. That is absolutely true. But there
are other studies that dont show that association and there are
other studies that show that PM isif you can interpret it this
wayhealthful. And I think that is the problem. EPA doesnt
present that data. They only present the positive data. They dont
present the negative data.
Mr. MILLER. Okay. One of the advantages of having peer reviewers is presumably that they know the literature of the field. Do you
believe thiswhat appears to me in my lay opinion to be an impressive set of expertsdo you think they do not know the data in
this area or the analysis, the literature in this area?
Dr. HONEYCUTT. Well, actually a number of those people, that is
their data, so I would expect them to advocate the use of their own
data over another researchers data. But
Mr. MILLER. But the other studies that you refer to
Dr. HONEYCUTT. Um-hum.
Mr. MILLER [continuing]. And Iyou are saying that what they
are referring to is just some studies and then there are contradictory studies. So when they say that the studies demonstrate an association between premature mortality and fine particulatefine
particle pollution at the lowest levels measured in the relevant
studies that what they are saying is our studies, but there are
other studies that contradict that?
Dr. HONEYCUTT. That is true.
Mr. MILLER. And that these couple hundred scientists did not
know about those studies or did they know about those studies?
Dr. HONEYCUTT. They may have. I am not sure what they did or
didnt know, but those studies are older studies. Those studiesthe
exposures occurred during the 80s and 90s. A lot of the newer
data shows different effects or doesnt show the effect.
Mr. MILLER. Okay. My time is expired.
And seeing no other Members here, I want to thank the witnesses for their valuable testimony, the Members for their questions. The Members of the Committee may have additional questions for you and we will ask you to respond to those in writing
if we do. The record will remain open for two weeks for additional
comments from Members.
Again, I want to thank you very much for your patience in a late
start to the hearing because of our voting schedule. The witnesses
are excused. Thank you all for coming.
The hearing is now adjourned.
[Whereupon, at 3:27 p.m., the Subcommittee was adjourned.]
107
ANSWERS
TO
POST-HEARING QUESTIONS
108
ANSWERS
TO
POST-HEARING QUESTIONS
109
U.S. House of Representatives
Committee on Science, Space, and Technology
Subcommittee on Energy and Environment
Questions for the Record - Responses by Dr. Michael Honeycutt

July 6, 2012
Hearing Title: EPA's Impact on Jobs and Energy Affordability: Understanding the Real Costs and
Benefits ofEnvironmental Regulations
1. According to OIRA's Draft Report to Congress on the Benefits and Costs of Federal
RegUlations and Unfunded Mandates on State, Local, and Tribal Entities, the benefits
from EPA air quality regulations that affect particulate matter represent almost 80
percent of all benefits from all regulations across the entire federal government. Do you
find that claim to be credible?
I do not find this claim to be credible. This conclusion is based on the monetization of mortality
risks attributed to PM2.5 (fine particulate matter). The true (if any) relationship between PM2.5 and
premature mortality is obscured by:
(1) the choice of studies that support the proposed relationship between PM25 and mortality
(and exclusion of contradictory data). EPA relied on two studies that showed a statisticallysignificant association between PM2.5 and premature mortality. If they had used any of the
several equally well- or better-conducted studies that did not show a statistically significant
association between PM2.5 and premature mortalityl, then the monetized benefits would have
been $0.
I Krewski el al.2000. Reanalysis of the Harvard Six Cities Study and the American Cancer Society Study of Particulate Air
Pollution and Mortality, Part 11: Sensitivity Analysis. Health Effects Institute. PI29-293. See models that include S02
McDonnell el al. 2002. Relationships of Mortality with the Fine and Coarse Fractions ofLong-Term Ambient PM 10
Concentrations in Nonsmokers. Journal of Exposure Analysis and Environmental Epidemiology. lO(5):427~36.
Koop and Tole. 2004. An Investigation of Thresholds in Air Pollution-Mortality Effects, Environmental Modeling and Software.
21(12):1662-1673.
Chen et at. 2005.The association between fatal coronary heart disease and ambient particulate air pollution: Are females at greater
risk? Environmental Health Perspectives. 113(12): 1723-1729. See data for males
Enstrom. 2005. Fine Particle Air Pollution and Total Mortality Among Elderly Californians, 1973-2002. Inhalation Toxicology.
17(14):803-16.
Lipfert el al. 2006. PM" Constituents and Related Air Quality Variables as Predictors of Survival in a Cohort of U.S. Military
Veterans. Inhalation Toxicology. 18:643-657.
Franklin ef al.. 2007. Association Between PM" and All-Cause and Specific-Cause Mortality in 27 U.S. Communities. lournal of
Exposure Science and Environmental Epidemiology. 17(3):279-87. see lag 0 data.
Zeger el al.200S, Mortality in the Medicare Population and Chronic Exposure to Fine Particulate Air Pollution in Urban Centers
(2000-2005). Environmental Health Perspectives. 116(12):1614-9. see data for Western U.S.
Krewski ef a1.2009. Extended Follow-Up and Spatial Analysis of the American Cancer Society Study Linking Particulate Air
Pollution and Mortality. Research Report from the Health Effects Institute. 140:5-114. see 1972-2000 data.
Klemm ef al.2011. The Impact of Frequency and Duration of Air Quality Monitoring: Atlanta, GA, Data Modeling of Air Pollution
and Mortality. 61:1281-1291.
Tony Cox. 2011. Hormesis for Fine Particulate Matter (pM, ,). Dose-Response. Pre-Press Article.
110
(2) the assumption of a no-threshold model which attributes risk to background levels of
PM2S This practice inflates the benefits because it calculates risk from PM2.5 levels that are
naturally-occurring and too small to be controlled by regulations.
(3) the application of a Weibull distribution to possible concentration-response functions

leading to the exclusion of data that does not support the assumption of a cause-and-effect
relationship between PM2.5 and premature mortality. Again, this artificially inflates the benefits
because it predicts premature mortality (and therefore monetized benefits) in parts of the
country where the actual data shows premature mortality due to PM2.5 exposure doesn't occur.
Based on the uncertainties regarding the limitations of observational epidemiology studies as well
as the methodological issues noted above, the benefits estimated by EPA for rulemakings under
the Clean Air Act are overstated.
2. The Subcommittee received a letter from the American Lung Association that stated
that, in the case of the recently-finalized Mercury and Air Toxic Standards, "For every
dollar spent to reduce air toxics pollution, Americans receive $3-9 in health benefits." Do
you agree with this characterization?
Not at all. This statement by the American Lung Association is taken from the Regulatory Impact
Analysis for the Mercury and Air Toxic Standards (MATS) rule, which relies almost exclusively
upon PM2.s co-benefits (see response to question 1 above). The EPA's economic analysis
misrepresented the actual benefits of the rule. Benefits should be based on direct health benefits
associated with reductions of the HAPs rather than including co-benefits associated with emission
reductions of non-HAP pollutants. More than 90% of the represented health benefits are based on
particulate matter reductions and not the HAPs that are the focus of the rule. Particulate matter is
not a HAP and is regulated under other EPA air quality programs. If EPA confined its analysis
only to the specific HAPs that pose a hazard to public health, any health benefits would be
insubstantial compared to cost ofthe regulation.
EPA was not able to quantify health benefits for reductions of actual HAPS regulated by the
MATS rule except for mercury. EPA's quantified health benefits of$4 to $6 million reflecting
mercury reductions are questionable, because that amount is based on the assumed economic value
of a total of 511 intelligence quotient (IQ) points. EPA multiplied the average loss of 0.00209 IQ
points per prenatally exposed child by 244,268 children assumed to be exposed to mercury via
their mothers' consumption of freshwater fish2. This is akin to requiring 10 vehicles to reduce
their speed by five mph per vehicle and then saying the resulting total decrease in speed is 50 mph.
An IQ reduction of 0.00209 points cannot be measured. Also, EPA assumed no lag time in the
response of methyl mercury levels in fish due to MATS, and if a lag was (correctly) assumed
monetized benefits would be significantly lower.
2 Please refer to additional testimony given 10/4/2011 before the Subcommittee on Energy and Environment - "Quality Science for
Quality Air": http://science.house.gov/sitesirepublicans.sdence.house.gov!files/documents
Iheariogs/l 00411 Jloneycutt. pdf
111
3. What did you mean when you said that there is legal guidance for establishing causal
relations and that relative risks less than 2.0 should not be considered? How does this
affect EPA's association between particulate matter and mortality?
There is scientific as well as legal precedence indicating that relative risks below 2.0 should not be
considered to support a hypothesized relationship (Federal Judicial Center Reference Manual on
Scientific Evidence Second Edition (2000) and NCIIIARC/WH03,4). This is because relative risks
less than 2.0 can often be explained by confounding variables, i.e. factors that were not
considered, but that are responsible for the observed effect. For example, cholesterol levels were
not measured in the Pope et al. 2002 study but might explain the observed cardiovascular disease
mortality rates. The relative risks for PM2.s and premature death reported to date are considerably
lower than 2.0. For the two studies most often cited by the EPA, the relative risks are 1.06 (Pope et
al. 2002 5) and 1.16 (Laden et at. 2006 6), and therefore may actually be due to confounding
variables. In fact, a recent report indicates that confounding likely plays a significant role in the
statistical findings of positive PM2s-mortality associations. 7
4. Aren't all of the assumptions within EPA's regulatory analysis and decision making
designed to be health-protective? Isn't that a good thing?
In recent years, the EPA has approached policy decisions with an overabundance of caution,
leading to excessively conservative regulations not fully supported by the best available science.
The application of this precautionary principle, without regard to the extent of population exposure
or risk, conflicts with best practices of science-based risk assessment. In defense of this approach,
some have argued that EPA always overestimates risks in order to provide adequate protection.
While this mayor may not be sound regulatory policy, systematic over-estimation of benefits
renders the cost-benefit process useless. Worst-case estimation of risks (and the benefits of
avoiding those risks) without any indication that they represent very unlikely or even impossible
scenarios, is highly misleading to the public and to elected representatives evaluating proposed
policies and regulations.
Contrary to what its advocates claim, this principle does not provide a prudent guide to developing
public health measures. Harvard law professor Cass Sunstein, who currently serves as
administrator of the Office ofInforrnation and Regulatory Affairs has said, "The precautionary
principle, for all its rhetorical appeal, is deeply incoherent. It is of course true that we should take
3 http://benchmarks.cancer.gov/2002/07/epidemiology-in-a-nutshelV "Relative risks or odds ratios less than 2.00 are viewed with
caution."
4 WHO/IARC Breslow and Day (1980). Statistical methods in cancer research. Vol. I. The analysis ofcase control studies. IARC
Sci. Pub!. No. 32, Lyon, p. 36. "Relative risks ofless than 2.0 may readily reflect some unperceived bias or confounding factor,
those over 5.0 are unlikely to do so."
, Pope CA III, RT Burnett, MJ Thun, EE Calle, D Krewski, K Ito, and GD Thurston. 2002. Lung Cancer, Cardiopulmonary
Mortality, and Long-term Exposure to Fine Particulate Air Pollution. lournal ofthe American Medical Association. 287:1132-
!I41.
F, 1 Schwartz, FE Speizer and DW Dockery. 2006. Reduction in Fine Particulate Air Pollution and Mortality. American
Journal of Respiratory and Critical Care medicine. 173:667-672.
7 Greven et 01. 2011. An Approach to the Estimation of Chronic Air Pollution Effects Using Spatia-Temporal Information. Journal
of the American Statistical Association. 106(494):396-406.
6 Laden
112
precautions against some speculative dangers. But there are always risks on both sides ofa
decision; inaction can bring danger, but so can action. Precautions, in other words, themselves
create risks-and hence the principle bans what it simultaneously requires. ,,8
The result of utilizing the precautionary principle is highly uncertain estimation of the benefits of
Clean Air Act rules. This is because regulating pollutants without proof they are indeed harmful ill
relevant doses negates the accurate quantification of what harm has been prevented. Further,
especially in times of resource scarcity, focusing attention and regulation on unnecessary risks can
result in inadequate attention or resources to address real health effect risks or problems.
5. Why shouldn't EPA claim regulatory benefits association with incidental particulate
matter reductions from non-PM rules?
In 2011, President Barack Obama issued Executive Order 13563, which states that agencies
should strive to reduce regulatory requirements that are "redundant, inconsistent, or
overla[!J!ing. "
Including PM2.5 co-benefits in multiple non-PM 2.5 rules is redundant. Section 109 of the Clean
Air Act requires that each NAAQS be set at a level that protects public health with "an adequate
margin of safety" (i.e. no additional public health improvements would be gained by tightening
the standard any further). If those concentrations are safe, then it is not appropriate to calculate cobenefits for PM2.5 below this level to justifY nOn-PM2.5 regulations. More broadly, co-benefits
from any pollutant that is regulated as a criteria pollutant with a NAAQS that conforms to the
requirements of CAA should not be included in the Regulatory Impact Analysis (RlA) of any
other pollutant. Including PM2.5 co-benefits in other RlAs not only results in double-counting of
benefits, but also prevents identification of ways to reduce regulatory burdens while still meeting
air quality objectives.
Baseline calculations for proposed rules are inconsistent with best practices. EPA has argued that
it does not double-count the PM2.5 benefits because it includes all existing regulations in the
baseline of emissions for each of its RlAs for another rule; however, this is not the case for the
following reasons: (1) multiple RlAs are prepared simultaneously; this creates a constant potential
for double-counting; (2) review of recent RlAs released by EPA indicates that all applicable CAArelated rules are not, in fact, included in the baseline calculations for these standards (e.g. see RlAs
for ozone, S02, and N02 NAAQS); and (3) the baseline calculations are based on monitored levels
ofPM2.5, and it is impossible to distinguish the effect of each rule on ambient levels of PM2.5'
Furthermore, each rule seeks to lower the same observed levels of ambient PM2 .5, resulting in
double counting of estimated benefits across multiple rules.
The consequences of these overlapping rules include lack of transparency and miscommunication
with the public and policy makers. PMz.5 co-benefits are reported as part of the total benefits in the
executive summary of an RIA and also in public announcements about the proposed rule. This
Cass R. Sunstein, "Throwing Precaution to the Wind: Why the 'Safe' Choice Can Be Dangerous," Boston Globe, July 13,2008.
For a more extensive critique. see Cass R. Sunstein, The Laws of Fear: Beyond the Precautionary Principle (Cambridge:
Cambridge University Press, 2005).
8
113
creates confusion for audiences who often fail to realize that these total benefits are mostly due to
reductions in PM2.5. Furthermore, PM2.s-reiated benefits would be more effectively and
appropriately obtained through revision to the PM2.5 NAAQS than through non-PM2.5 rules.
Moreover, reliance on PM2.5 co-benefits undercuts the practical value of RIAs and allows EPA to
avoid improvements to its methods for characterizing and quantifying health and welfare benefits
for other pollutants.
6. The Texas Commission on Environmental Quality is the 2 nd largest environmental

agency in the world. From your experience at TCEQ, are there ways that EPA could
improve its cost-benefit analysis and stakeholder outreach process?
Generally speaking, risk assessments that serve to inform cost benefit analysis should include the
following steps:
Consider all available appropriate and relevant studies, not just studies that present
positive results.
Report comprehensive weight-of-evidence based analyses, including positive and
negative data.
Perform extensive sensitivity analyses to determine how confounding affects the
analysis.
Select health endpoints based on toxicological grounds rather than on post-hoc
statistical grounds.
Focus on studies with exposure data collected for individuals instead of groups (i.e. the
studies by Pope et al. 9 and Laden et al. 10 do not determine personal exposure to PM - it
was assumed to be equal for all individuals within a metropolitan area).
Use Cox proportional hazards models as the exposure-response models.
Do not use splines in statistical models, especially smoothing splines, as they have the
effect of making the data fit the model instead of choosing an appropriate model to fit
the data.
Consider including thresholds and nonlinear relationships in the exposure-response
models.
Estimate risks using best estimates of individual exposure rather than extreme
characterizations of population exposures.
Estimate risks for the general population in addition to the "most sensitive"
subpopulation.
Clearly state the assumptions made and their qualitative and quantitative consequences.
Further, the EPA should demonstrate a peer-review process that reflects transparency and
commitment to representing all data, not just data that supports its policy goals. The non-profit
organization, Toxicological Excellence for Risk Assessment (TERA) provides a superb
CA III, RT Burnett, MJ Thun, EE Calle, D Krewski, K Ito, and GD Thurston. 2002. Lung Cancer, Cardiopulmonary
Mortality, and Long-term Exposure to Fine Particulate Air Pollution. Journal ofthe American Medical Association. 287: 1132-
9 Pope
1141.
Laden F, J Schwartz, FE Speizer and DW Dockery. 2006. Reduction in Fine Particulate Air Pollution and Mortality. American
Journal of Respiratory and Critical Care medicine. 173 :667-672.
10
114
description of peer review: A peer review is an in-depth assessment of the assumptions,
calculations, alternate interpretations, methodology, and conclusions of the document under
review ... peer reviewers and consultants should be selectedfor both independence and
scientific/technical expertise ... [andJinclude a range ofperspectives on each panel, including
diverse professional affiliations (e.g., academic, consulting, environmental, government, and
industry). The evaluation of real or perceived bias or conflict of interest is an important
consideration and for both peer review and consultation panels and every effort is made to avoid
conflicts of interest and biases that would prevent a panel member from giving an independent
opinion on the subject ... an objective evaluation by independent experts with a variety ofdifferent
viewpoints and perspectives is critical to the credibility ofany peer consultation or peer review. II
TCEQ agrees with this description and strives to implement these principles. In fact, when the
TCEQ revises its Guidelines for Risk Assessment, a peer review is conducted by a disinterested
third party. No person on the peer review panel works for or receives funds from TCEQ. It is a
conflict of interest for such individuals to participate in the peer review process, although
stakeholders are welcomed to participate in the public comment process. Following the public
comment period, each and every comment is addressed and changes are made to the document
(when justified) as a result of this process. When TCEQ disagrees with a comment, justification is
provided in the response to comment document, which is made publically available along with the
modified Guidelines document. The EPA should utilize an equally transparent process, free as
possible of conflict of interest.
To this end, the following recommendations for improvement are suggested:
o EPA risk assessments should include all of the steps listed above with results clearly
communicated in resulting policy assessments, regulatory impact analyses, and final
rulemakings. Emphasis should be placed on the limitations of the available scientific
literature in order to provide policy makers with accurate information. This is particularly
important to avoid the appearance that proposed rules are based on policy objectives, and
merely "backed up" by applicable scientific evidence.
o Members of the Science Advisory Board and Clean Air Science Advisory Committee
should not include the authors of studies utilized in that specific assessment, nor should
they be current recipients of EPA funding, as this represents a significant conflict of
interest (see figures I and 2). If such individuals are to be consulted, equal weight should
be given to scientists representing local and state governments as well as industry experts.
o Prior to developing a rule, EPA should solicit stakeholder input during the development
phase. TCEQ has found that engagement of affected regulated entities can help avoid the
need for drastic changes from proposal to final adoption of a rule.
o When soliciting public comment, EPA should respond to each comment in a substantial
manner and revise technical and policy documents accordingly. A response to comments
document which lists each comment (acknowledging that there may be multiple comments
with very similar objectives that can reasonably be combined for this purpose) along with
the agency responses should be provided with every rule.
o Place the risks associated with ambient air pollution into the context of other risks people
face. This is a crucial function of public health officials, who have an obligation to present
scientific data in an unbiased manner and avoid inaccurate or inflannnatory language.
11
http://www.tera.org/PeerlDescription.html
115
7. You stated near the end of your testimony that these regulations could have negative
unintended consequences. Could you explain what you mean by that?
When regulations are routinely based on extrapolated, highly uncertain risk analysis, stakeholders
must distinguish between real risk and these often alarmist conclusions. The result is that other
necessary tasks are postponed. Indeed, University of Texas law professor Frank Cross observes,
"The truly fatal flaw of the precautionary principle, ignored by almost all the commentators, is the
unsupported presumption that an action aimed at public health protection cannot possibly have
negative effects on public health. ,,12
In the experience ofTCEQ, time and resources spent analyzing and responding to unnecessary
regulations based of perceived (rather than real) risks detracts from other, far more urgent needs of
our citizens. Activities such as the development of safe screening levels are often delayed while
staff respond to policy issues that have significant consequences for the State.
The solution for an adverse health effect associated with an environmental risk factor can itself
become a risk factor for other health effects 13. Public health officials must be aware of such
potential consequences when advising citizens. Take, for example the following quote from EPA
Administrator Lisa Jackson: "We are actually at the point in many areas of this country where on
a hot summer day, the best advice you can give is don't go outside. Don't breathe the air. It may
kill you. ,,14 Not only is this hyperbole unscientific, inaccurate, and inflanunatory, but this type of
statement gives the public the impression that staying indoors and avoiding physical activity is
preferable. In fact, indoor air quality is clearly worse than outdoor air quality (Burke et al. 2001
and references therein l5 ) and this type of advice can lead to unintended negative consequences.
For example, suggesting that citizens avoid outdoor exercise in order to prevent exacerbation of
asthma symptoms can result in unintended negative consequences such as contributing to obesity.
The Policy Assessment (PA)16 docnment serves to "bridge the gap" between relevant scientific
information and assessments and the judgments required of the EPA administrator in determining
whether and how to revise the NAAQS. In reviewing the PA that supports the newly proposed PM
NAAQS, the following comment from CASAC member Dr. Robert Phalen came to our attention:
"I am struck by the limitations placed on the Staffinframing the P.A., and concerned that readers
may believe that several potentially adverse secondary health consequences have been evaluated
along with the direct health effects, when they have not. Thus, I recommend adding an explicit
informative statement to the P.A., or the cover letter, such as: 'Due to statute, case-law, and
policy decisions, it should be noted that this Policy Assessment addresses only the direct adverse
health effects ofPM mass fractions. Thus, secondary public health effects, such as (1) the
potential health effects of compliance actions on jobs, and the availability ofgoods and
services;(2) the potential health effects at locations that have positive (rather than negative)
health associations with PM mass; and (3) the potential health effects of changes in PM mass on
other air contaminants (e.g. UFP counts, and airborne acidity), are not considered. In short, the
Frank B. Cross. "Paradoxical Perils of the Precautionary Principle," Washington and Lee Law Review 53. no. 3 (1996): 860.
Steve Packham, Phd, DAB.T. presentation titled: "Utah's Recess Guidance: Based on Air Quality." March 7, 2011.
14 On HBO's "Real Time with Bill Maher," October 7,2011.
" Burke et al. 2001. A population exposure model for particulate matter: case study results for PM2.5 in Philadelphia, PA. Journal
of Exposure Analysis and Environmental Epidemiology II :470-489.
16 http://mvw.epa.gov/ttnlnaaqslstandards/pmldata/20110419pmpafinal.pdf
12
lJ
116
range ofpotential unintended secondary adverse consequences have not been evaluated in this
document. Thus the recommendations herein may, or may not, improve overall public health. '" It
is disturbing that such salient and reasonable advice from a member of the CASAC panel has been
disregarded by EPA in the Policy Assessment presented to the Administrator.
Looking at the issue in the most practical way, if an unnecessary regulation raises the cost of
electricity such that a low-income elderly person feels they can't afford to use air conditioning
during periods of intense heat they are more likely to suffer heat stroke.
8. I understand the EPA recently conducted some experiments where they exposed people
to high levels of PM. What are the implications ofthese experiments?
A case study published in February 2012 17 describes exposure ofa volunteer to Concentrated Air
Particles (CAPs). This individual had a personal and family history of heart disease as well as
numerous other medical issues. During the exposure, the volunteer experienced an irregular heart
beat and was transported to the hospital. A Freedom of Information Act request initiated by Steve
Milloy located data spanning 2010 and 2011 for 40 additional individuals exposed to CAPsl8. Of
these, 39 experienced no clinical effects and 1 experienced an elevated heart rate.
Significant concerns are raised by this information: (1) If the EPA believes PM2.5 is lethal, is it
ethical and/or legal to expose human volunteers to such high levels ofPM2.5? Indeed,
Administrator Jackson testified to Congress l9 that, "[Airborne] particulate matter causes
premature death. It doesn't make you sick. It's directly causal to dying sooner than you should." (2)
The alternative interpretation is that these results invalidate the EPA's assertion that PMz.5 causes
premature mortality. In fact, EPA has not been able to articulate a mechanism whereby PM2.5
causes mortalitlo. Moreover, Green and Armstrong conclude, "it remains the case that no form of
ambient PM-other than viruses, bacteria, and biochemical antigens-has been shown,
experimentally or clinically, to cause disease or death at concentrations remotely close to
ambient levels ... hundreds of researchers, in the
and elsewhere, have for years been
experimenting with various forms ofpollution-derived PM, and none has found clear evidence of
significant disease or death at relevant airborne concentrations. ,,21
u.s.
u.s.
17 Ghio ef at. 2012. Supraventricular Arrhythmia after Exposure to Concentrated Ambient Air Pollution Particles. Environmental
Health Perspectives. 120:275-277.
18 http://junkscience.coml2012/04/18/epa-human-experiments-debunk-notion-of-killer-air-pollution-agency-hides.exculpatoryresults!
19 September 22, 2011. House Energy and Commerce Committee Meeting on Air Regulations.
"U.S. EPA. Integrated Science Assessment for Particulate Matter (Final Report). U.S. Environmental Protection Agency,
Washington, DC, EP A/6001R-08JI39F. 2009. From Chapter 5, Possible PathwayslModes of Action: "Additional studies will be
required to clarify the biological mechanisms underlying the health effects of PM."
21 Laura Green and Sarah Armstrong, "Particulate matter in ambient air and mortality: toxicologic perspectives," Regulatory
Toxicology and Pharmacology 38 (2003) 326-335.
117
FIGURES
Figure 1. Chartered Clean Air Science Advisory Committee

(CASAC)
il!i EPA Funded
Non-EPA Funded
Academic
Industry
Non-Profit
State Government
figure 2. Particulate Matter Review Panel ofthe CASAC

jjijEPAFunded
Non-EPA Funded
Industry
Non-Profit
State Government
118
Eugene M. Trisko
Attorney at Law*
P.O. Box 596
Berkeley Springs, WV 2541 I
(304) 258-1977
(301) 639-5238 (Cell)
[email protected]
*Admitted in DC
July 9, 2012
Honorable Andy Harris, MD

Chairman
Washington, DC 20515-6301
Bye-mail transmission
Re: Responses to Committee Questions, Hearings on EPA's Impact on Jobs and Energy
Affordability: Understanding the Real Costs and Benefits of Environmental Regulations,
June 6, 2012
Dear Chairman Harris:
Thank you for your letter of June 25, 2012, concerning the above hearing. I greatly
appreciated the opportunity to testify before the Subcommittee to present the findings of the
study that I conducted on behalf of the American Coalition for Clean Coal Electricity
(ACCCE), "Energy Cost Impacts on American Families, 2001-2012."
I previously supplied Subcommittee staff with a corrected version of my portion of the
hearing transcript.
Attached are responses to the questions that you forwarded on June 25 th in connection with
my testimony and prefiled statement. These responses reflect my own views, and do not
necessarily represent the views of ACCCE or its member organizations.
Thank you again for this opportunity, and please do not hesitate to contact me if you have
further questions.
Sincerely,
Dlgitany SIgned by EUge~e M, Trisko
Eugene M. Tnsko ~~';';;~y~~~O.MTnSkO,c=US,ou=

Reason: I am the author of this document
Date: 2012.07,08 20:53:29 -04'00'
Eugene M. Trisko
Attachment (Committee Questions and Responses)
119
Committee Questions and Responses
1. In your testimony, you state that "lower income families are more
vulnerable to energy costs than high-income families because energy
represents a larger portion of their household budgets." In the event
electricity prices were to rise, can you elaborate on how this might
disproportionately impact lower income families, the choices and tradeoffs
that might have to be made, and the overall impact this could have on the
health and welfare of lower income families in this country?
Response: The demand for electricity is relatively inelastic over the shortterm, meaning that demand is not very sensitive to increased prices.
Increased electricity prices due to compliance with environmental
regulations or other policies would pose additional hardships on lower- and
fixed-income families by creating additional financial pressure on their
budgets for other necessities such as food, health care, child care, housing,
etc. A detailed study, beyond the scope of my testimony, would be needed
to assess how these tradeoffs are being managed by lower- and fixed-income
families.
As documented in the study attached to my testimony, energy expenditures
for the 50% of U.S. households with annual gross incomes less than $50,000
have nearly doubled over the past decade, from an estimated average of 12%
of after-tax income in 2001 to an estimated average of22% in 2012. These
increased energy expenditures inevitably force difficult budget choices
among other necessities. Meanwhile, real incomes have not increased to
offset this additional cost burden on lower- and fixed-income families. As
indicated in my testimony, the u.s. Census Bureau reports that since 2007
real (inflation-adjusted) median household income has declined by 6% (from
$52,823) and is 7% below the median household income peak ($53,252) that
occurred in 1999.
2. Your report found that residential price increases since 2000 have been
associated with capital, operating and maintenance costs incurred due to
environmental regulations. Given the current trend of environmental
regulations in the last few years, will there be other even greater increases in
electricity prices associated with meeting these new standards? How will
120
this affect the percentage of the average American's post-tax income spent
on energy?
Response: The electricity price data included in my testimony show a clear
trend toward higher electricity prices since 2000 - nearly a 50% increase in
nominal dollar terms during a period in which inflation as measured by the
CPI increased by 31 % (2000 to 2011). A portion of this increase can be
attributed to the costs of compliance with new environmental regulations
such as Phase IT of the Title IV acid rain program, the NOx SIP Call, the
Clean Air Interstate Rule, and other environmental regulations.
There is evidence that even larger electricity price increases likely will result
from new EPA regulations that have not yet been fully implemented,
including the Mercury and Air Toxics Standards Rule (MATS) and the
Cross-State Air Pollution Rule (CSAPR). In its Report to Congress on the
Costs and Benefits of the Clean Air Act (2011), EPA indicates that the
annual cost of compliance in 2010 with all existing utility clean air rules was
$6.6 billion ($2006). In comparison, EPA's Final Regulatory Impact
Analysis of the MATS rule projects the annual costs of compliance with this
rule at $9.6 billion ($2007) in 2016. EPA estimates the annual costs of the
CSAPR rule at an additional $0.8 billion ($2007) in 2014 (78 FR 48208,
48215, August 8,2011, at Table IlI-4.) The two rules together thus will add
$10.4 billion annually to the nation's electric bill.
The prospective impacts on electricity prices of the costs of compliance with
the MATS and CSAPR rules - assuming that they were implemented in the
absence of Congressional, judicial or administrative actions - will be systemspecific, with the largest impacts anticipated in eastern states that rely upon
coal for a substantial share of electric generation, and that will need to
retrofit or upgrade substantial numbers of pollution control devices (e.g.,
West Virginia, Ohio, Kentucky, Indiana, Illinois, Missouri, etc.)
Determining how these increased costs will be passed along to consumers,
and their impacts on consumer electric prices and costs, will depend in large
measure upon how state regulatory authorities address cost recovery issues
among residential, commercial and industrial customer classes. Informal
reports from state public utility commission officials in coal-dependent
states indicate that electric rate increases on the order of 15% to 30% may be
needed to provide cost recovery for the investments in pollution controls
required by the MATS rule. This is an issue that the Committee and
121
Subcommittee may wish to explore in future hearings, with invited PUC
witnesses from states expected to bear large portions ofthe compliance
burden.
3. Your report states that while prices for residential electricity have only
increased 51 % since 1990, the price of residential natural gas has nearly
doubled during this same time frame. What implications does this have for a
potential future whereby natural gas generating units serve as this country's
source of baseload electricity?
Response: Two recent EPA regulations - the final MATS rule with its
unachievable emission limits for new coal-based generating plants (and in
particular for mercury emissions), and the proposed NSPS rule for
Greenhouse Gas Emissions - make it extremely difficult, if not impossible,
to permit, finance and construct any new baseload coal capacity beyond a
handful of plants already in the construction phase. The nation is being
forced, in effect, to accept natural gas combined-cycle capacity as the
predominant source of new baseload capacity for the indefinite future. This
prospect is fundamentally inconsistent with the "all of the above" energy
policy advocated by the President, and risks undue reliance on natural gas
with its long-term history of price volatility.
As mentioned during the Q&A portion of my testimony, the Committee may
wish to review the Department of Energy's price uncertainty analysis of
future NYMEX natural gas contract prices. The most recent analysis from
the EIA Short-Term Energy Outlook for June 2012 shows the 95%
confidence intervals for the December 2013 natural gas contract.
EIA's price uncertainty chart, which appears below, indicates a range of
prices in December 2013 from $1.95 per MMBTU to $7.39 per MMBTU.
Utility investments in new generating capacity involve plants with 50 to 60
year lifetimes. The nation with the world's largest coal reserves should
develop energy policies that maximize - not constrain - future generation
options in light offuel price uncertainties such as these. No other nation has
committed to undemonstrated CCS technology as a condition precedent for
the construction of new coal generation capacity.
122
Henry Hub Natural Gas Price
dollars per million btu
8
7
-Historical spot price

--STEO forecast price
-NYMEXfuluresprice
_<11_ gOS% i\iVMi::X futures upper confidence interval
";liI,,$..I!Y./!JJ
.All'.
opi
fI ....
5 - 000,"0:*-095% NYMEX futures lower confidence interval 00;# K
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Ji1
1fI>'
I , , ,
Jan 2011
, , I , ,
Jul2011
Jan 2012
Jul2012
Jan 2013
"
,I
Jul2013
Note: Confidence interval derived fron options market informationforthe 5 trading days ending June 7, 20120
Intervals 10t calculaled formonlhswith sparse trading in near-the-money options eontractso
Source: Short-Term Energy Out ook, June 2012
4. The EPA, in its regulatory analysis for the Carbon Pollution Standard,
asserts that "the level of avoided negative health and environmental effects
expected would imply net social benefits from this proposed rule." Given
your testimony that higher energy costs decrease the amount of discretionary
income family may spend on other necessities, including healthcare and
food, would you agree with the Agency's assessment?
Response: No. The Carbon Pollution Standard would impose carbon capture
and storage requirements - a technology that has not been commercially
demonstrated in this country" on new coal plants. This effectively would
render coal uneconomic as a choice for future new electric generation
facilities, largely regardless of the future price of natural gas. Electricity
consumers should be concerned that the future price of electricity will be
increasingly linked to volatile natural gas prices. Low- and fixed-income
households will become more vulnerable to energy price increases as a
result. This is another issue that deserves consideration in a follow-up
hearing with state PUC officials, as recommended above.
123
5. According to OIRA's Draft Report to Congress on the Benefits and Costs
of Federal Regulations and Unfunded Mandates on State, Local, and Tribal
Entities, the benefits from EPA air quality regulations that affect particulate
matter represent almost 80 percent of all benefits from all regulations across
the entire federal government. Do you find that claim to be credible?
Response: OIRA's assessment appears to be consistent with the testimony
that Dr. Honeycutt offered at hearing, and I defer to his expertise. More than
99% of the health benefits that EPA has claimed for the MATS rule are
related to "co-benefits" from the reduction ofPM2.5 and other pollutants
already regulated by multiple provisions of the Clean Air Act. Healthrelated benefits from mercury reductions are de minimis, with a net present
value of $500,000 to $6.0 million according to EPA's Final RIA for the
MATS rule. The RIA also shows that MATS would reduce mercury
deposition on average by 1 percent in the continental United States.
6. Do you think that recent EPA regulatory activity is consistent with an "all
of the above" energy policy?
Response: See response to Question 3, above.
7. The recently-proposed Carbon Pollution Standard for Power Plants only
applies to new sources, but some have indicated that the agreement that EPA
signed with environmentalist groups will guarantee that they expand it to the
existing facilities. How confident are you that EPA will only regulate new
coal-fired power plants?
Response: As a result of court decisions, EPA has considerable flexibility in
the manner in which it chooses to apply greenhouse gas regulations to
various sectors of the economy. Many share the concern that EPA may next
move to apply GHG standards to existing sources, particularly major sources
undergoing modification, thereby arresting progress in maintenance and
modernization of the existing coal fleet.
In recent years, a pattern of "regulation by consent decree" has evolved,
effectively giving a large degree of control over EPA's regulatory agenda to
the courts and to certain interest groups. A larger Congressional role both in
oversight and in statutory direction is needed to ensure that generic
legislation like the Clean Air Act is applied appropriately, and is updated to
124
reflect changing scientific, environmental, economic, and social
considerations.
8. In the EPA's regulatory impact assessment for the NSPS for EOUs, the
"EPA does not anticipate this rule will have any impacts on the price of
electricity, employment or labor markets, or the US economy." Would you
agree with that statement?
Response: For the reasons expressed here and above, I respectfully disagree
with EPA's assertions about the potential macroeconomic impacts of the
OHO NSPS rule. More detailed sensitivity analyses of the relative prices of
coal and natural gas are needed to provide an adequate basis for judging the
economic risks and potential costs of the rule, including adverse labor
market impacts from unque reliance on natural gas as the principal form of
new baseload generation.
Studies such as NERA's March 2012 assessment of the MATS rule prepared
for ACCCE (previously supplied for the hearing record pursuant to
unanimous consent) show that large net employment dislocations can result
from regulations that EPA analyses suggest would create jobs. EPA needs
to update and ro enhance its modeling capability for the prediction of
employment dislocations, using readily-available models that account for
state and regional electricity price increases and their impacts on
.employment, output and household income.
125
ILLINOIS CHAMBER
OF COMM:ERCE
July 23, 2012

The Honorable Andy Harris, M.D.
Chairman
2321 Raybum House Office Building
WashingtOI!I, DC 20515-6301
CHWAGO OFFICE
300 it Wacker Drive
SUitlt1600
Chic'go.ll60606
...." 31l983.7100
~"
312.983.7101
www.ilchamber.org
Dear Chainnan Harris:

Thank you :lor the opportunity to testify at the Energy & Environment subcommittee
hearing entitled EPA's Impact on Johs and Energy A/fordahiJity: Understanding the
Real Costs and Benefits ofEnvironmental Regulations on June 6, 2012. Here are the
answers to your follow-up questions:
Q.
What are the cumulative effects ofthese various EPA rules on the botiom lines of
small businesses? Do you think EPA's carbon pollution standard, which wiN effectively
ban coal generation, will impact manufacturers and small businesses?
A.
The bottom line issue here is the availability and cost of electricity. For many
small businesses and manufacturers, electricity is the second highest cost on ':heir
spreadsheets (after personnel). Therefore, the impact of the cumulative effect of the EPA
mles will depend on how they end up affecting the cost and availability of el,?ctricity
throughout the cmllltry. As you can imagine there are many differing opinions within the
industry about how - and if - these rules will translate into cost increases andlor supply .
concems. It is hard to predict because of the volatility of the market, the cunent increase
in natural gas production, the current reliance on nuclear power and the rising (but still
small) use of alternative energies.
Ifthe EPA's rules come into effect and they do end up reducing our reliance on
coal electricity gel'\eration (vvhich we believe they will), they will have an effect on small
businesses if other fonns of electricity generation can't fill the gap Oack of supply) or if
those other forms of generation end up being more expensive than coal (incr,~ased costs
to consum,~rs). Even though we are excited about the prospects of natural g,,s production
in the United States, it is a bit premature to assume that production will cont'11Ue at
current levels and consumer prices will stay at historic lows.
We~ believe the coal industry needs a predictable regulatory enviromrlt~nt from the
Federal Government so it can determine which plants make sense to invest ill and which
ones don't - and provide incentive for coal companies to fmd better, cleaner ways to
produce electricity from coal as they've been doing for the past forty years.
Q.
In your testimony, you mention that it will be diffiCUlt for companies to obtain
financing for new coal plants given the uncertain status ofCarbon Capture and
Sequestration (CCS) now and questionable prospects for its viability in the future. Aside
from the difficulty in securingfinancing based on the hope that the new technology will
be available and affordable at some point in the future, do you feel that this uncertainty
126
ILLINOIS CHAMBER
OFCOMME.RCE
will result in. additional difficulties in obtaining the necessary construction and operating
permits.
A.
Not to quibble or parse, but I didn't say that CCS has questionable prospects, just
unknown prospects. No one knows whether the process can overcome the technological,
regulatory and legal hurdles and then cross the finish line by working successfully on a
commercial scale. Given this uncertainty, the EPA's regulations are designed to mal<e it
next to impossible to get fmancing on a very risky bet that the coal industry CHn
overcome the hurdles of CCS overnight. Making "bets" on our largest domestic
resource, which provides such a huge chunk of our electricity, seems to us to he bad
policy. We believe the Carbon Rules pmmulgated by the USEPA put new coal
generation on the back burner, ifnot on a deathbed.
To answer the question in a simpler way, if you can't get the financing to build a
plant, you certainly can't get a construction or operations permit. Even if you C.all find
the financing, construction and operation permits might be difficult as you'd have to
prove you can meet the stringent USEPA regulations on carbon; and right now no one
can.
Q.
In addition to the proposed Carbon Pollution Standard for New Power Plants,
are there other EPA proposed or financial regulations that could negatively impact
Energy Council members?
A.
My members generate, transmit and transport all kinds of energy - wind, coal,
solar, natural gas, crude oil, nuclear, waste-to-energy, biofuels and more. Ewry EPA
rule affects them in some way, shape or form- sometimes positively, sometimes
negatively. But my members gave me the green light to testify on the Carbon Rules
because it seemed like they were written to make life for one form of generation - coal -very diffictllt. Many of my members believe that regulations should not be V\~itten to
pick winne:rs or losers, but to provide realistic road maps to enable companie:; to meet
new environmental standards in a competitive marketplace. We are blessed with everincreasing diverse choices when it comes to electricity generation. Why should we
promulgate rules that will result in the demise of one of them and overdependence on the
rest? Give them a chance to compete and advance more efficient, lower emiflsion
technoiogil'S, That kind of regulation creates a better planet in the long term and a better
energy market for all Americans.
I hope these answers provide some insight and are deemed helpful to the ongoing
process,
:::;;;.{i)J~{
Tom Wolf
Executive Director, Energy Council
127
.c
Your To)uchstone Energy" &nner
"'~
~4'
July 06, 2012
ViaE-mail
Chairman Andy Harris
US House of Representatives
Washington, DC 20515-6301
Attn: Taylor Jordan [email protected]
Re: Response to Questions for the Record - ODEC Testimony from June 6, 2012 Hearing
Dear Chairman Harris:
In response to your letter dated June 25. 2012, Old Dominion Electric Cooperative (ODEC)
offers the following answers to the Questions for the Record posed in conjunction with my
testimony given at the June 6 hearing entitled "EPA's Impact on Jobs and Energy Affordability:
Understanding the Real Cost and Benefits of Environmental Regulations". We very much
appreciate the time given to speak before the subcommittee and also the opportunity to address
follow-up questions for which we will provide our cooperative's perspective on very critical
issues facing our country and our company.
1. Do you think that recent EPA regulatory activity is consistent with an "all of the
above" energy policy?

NQ, the underlying assumption that natural gas and renewables will be the technology of
choice speaks very strongly to this issue. While EPA has proposed what they feel is a
reasonable solution to allow coal to continue to be used, the practicality of the situation
will be that companies will not be willing or able to take the risk on the viability of carbon
capture and storage (CCS) technology. New coal plants will not be built and the existing
fleet will be slowly phased out. There are few options available for base load power, and
the loss of a significant and abundant energy resource like coal runs counter to this
country's needs to ensure a diverse energy mix. Maintaining use of all our resources will
provide competition among base load fuels in the market place resulting in true price
stability and move us in the direction of energy independence.
While we would all like to find more and better ways to generate electricity without any
environmental impact, the fact of the matter is new technology, while moving forward,
128
July 6,2012
Page 2
has not, and will not realistically be able to progress at an accelerated rate to make up
potential large shortfalls in our generation capabilities. EPA's justification that these
mandates will encourage alternative technology and spur development of commercially
viable CCS is extremely shortsighted. What has been and will be successful for this
country are technologies developed, vetted, and brought to market by pioneers,
researchers and visionaries working in collaboration with the government and the private
sector. This formula has successfully worked for decades and not government mandates
and oppressive regulations. ODEC believes that we must continue to move forward to
better the environment, but based upon sound science, efficient technology, and in a
manner that is economically responsible and environmentally balanced. Always keeping
in the fore front these decisions directly affect all of our electric bills and the United
States competitive position in the world. We must never lose sight that affordable and
abundant electricity is the fundamental foundation for every sector of our economy,
without exception.
1. In the EPA's analysis for the proposed Carbon Pollution Standard for Power
Plants, the agency assumes that "generation technologies other than coal (including
natural gas and renewable sources) are likely to be the technology of choice for new
generating capacity." In your opinion, is this assessment correct?
NQ, this is a very large assumption based upon a small window of current data. While
none of us possess a crystal ball to know what will happen in the future, the EPA should
not be engaging in this type of supposition regarding the future of the energy market.
While there is available information from a variety of reliable sources regarding the
quantities of natural gas that are significantly higher than once estimated, there are still
the questions of development of more and better extraction technology, and additional
storage and infrastructure, as well as potential environmental impacts on water, which
must be addressed to take full advantage of these resources. From a national
perspective, the assumption that there will be adequate natural gas supply throughout
the country is erroneous. This proposed rule fails to consider or acc04nt for lack of fuel
availability in many geographic areas, and this failure is a fatal flaw.
While natural gas prices are at record lows currently, no one should forget that between
1999 and 2005, US natural gas prices quadrupled and there were significant spikes as
recent as 2008. Furthermore, natural gas companies are pursuing developing liquid
natural gas (LNG) facilities to transport natural gas from the US to other parts of the
world. EPA has not considered the economic impact of LNG export on the US market
and how it would affect this rule.
Additionally, renewable technology has made progress; however, many of these sources
are still heavily subsidized, intermittent and not truly economically viable. Moreover,
different areas of the country have very different potential to take advantage of
renewable technology. To assume technologies other than coal can and will be the
choice in many regions of the country is extremely troubling.
2
129
July 6,2012
Page 3
EPA has stated that the proposed Rule is based upon a "common sense approach".
However, ODEC considers this proposal to be contrary to common sense and, in fact,
the intent of the requirements of the Clean Air Act (CAA). Common sense would
normally dictate that we as a country should be able to utilize a diverse mix of resources
in the most efficient manner that is technically feasible at the time. While ODEC agrees
that there should be forward thinking regarding technology, no one, including EPA,
should be making forward assumptions that can and will have significant unintended
consequences.
In Section 1 of Executive Order 13563, addressing the general
principles of regulation, it states "It [our regulatory system] must promote predictability
and reduce uncertainty." Further Section 4, in discussing flexible approaches, the order
states that agencies "consider regulatory approaches that reduce burdens and maintain
flexibility and freedom of choice for the public." The regulation of technology in the
proposed rule has not embodied these principles. Electricity affordability from natural
gas generation is significantly driven by the fuel's price. The proposed standard will
effectively eliminate competition in the market place and ODEC's choice for affordable
electric power. The electric industry will become a price taker of gas monopolies.
Regulations and Unfunded Mandates on State, Local, and Tribal Entities, the
benefits from EPA air quality regulations that affect particulate matter represent
almost 80 percent of all benefits from all regulations across the entire federal
government. Do you find that claim to be credible?
Based upon a review of the Draft Report dated March 2012, that percentage on its face
appears to be correct. ODEC has not done a specific calculation. However, ODEC, as
well as other utilities, has continued to comment that the assumptions and
methodologies used to calculate the overall health benefits from the EPA regulations
have a high degree of uncertainty and in many cases, the benefits are significantly
biased high. The underlying assumptions used to calculate the benefits of these rules
are not necessarily indicative of the real benefits. In many cases, both past and present,
the benefits calculated, which are primarily health-related, are based upon a direct
assumption that a certain amount of emissions will equate to a certain increase in
atmospheric concentration which relates to a specific number of health impacts
(morbidity, hospitalizations, treatment, lost work time, etc.). All of the assumptions made
the air quality & statistical models used, the specific research data chosen - all have
inherent inaccuracies. In an issue brief entitled "PM2.5 Reductions and Impact on
Premature Death: An EPRI Perspective" (February 2009), the Electric Power Research
Institute (EPRI) discussed the inherent inaccuracies in estimating avoided deaths and
health impacts due to changes in air quality. In their conclusions, EPRI considers that
studies' "estimates of impact vary substantially" and "Estimates of changes in
atmospheric pollutants and their resultant impact on mortality should reflect this reality
and recognize these estimates remain burdened with considerable uncertainty."
130
July 6,2012
Page 4
As you well know, within the OIRA report, they state in the introductory paragraphs that
"It is important to emphasize that the figures here have significant limitations" and In
addition, and significantly, prospective estimates may contain erroneous assumptions
producing inaccurate predictions; retrospective analysis, recently required by Executive
Order 13563, can be an important way of increasing accuracy." Therefore, while the
benefits in the OIRA draft report are a correct compilation of the EPA regulatory
contribution, the actual benefits associated with the various regulatory actions are
debatable.
3. What is the potential for utilizing carbon capture and sequestration for the Cypress
Creek Power Station to meet EPA's proposed rules?
First and foremost, if the proposed New Source Performance Standards (NSPS) for
greenhouse gas emissions is finalized with the current requirements, Cypress Creek will
not be constructed. The future compliance obligations and the associated liability would
not allow for financing of the project. With that said, ODEC has always tried to leave
open avenues for utilization of technology in the future whenever it may become
commercially available. Speaking from purely a technological standpoint, to implement
CCS at Cypress Creek, there are numerous hurdles that would have to be overcome:
1. The capture technology would have to progress to the point of being able to
adequately capture the exhaust volumes from a large plant without a heavy
parasitic load burden to run what amounts to essentially a chemical plant.
2. Because the proposed sites are not in close proximity to an area even being
considered for research as a storage repository, the transportation
infrastructure would have to be fully permitted, designed and deployed i.e.
barge, rail or pipeline. All of this requires multiple public hearings with multiple
government agencies, an expensive and time consuming process. Also there
is no guarantee at the end of the process we will have the necessary permits
and then multiple legal suits will be filed by environmental organizations.
3. Long-term storage locations would have to be carefully studied and fully
explored before a final repository could be selected.
4. The legal liability questions have to be answered. Who is responsible for the
long term storage of millions of gallons of carbon dioxide for the next 50 or
100 plus years from now? What happens when a seismic event occurs and
releases an odorless, colorless and tasteless gas that is deadly to all life?
Only when all the compounding issues of capture, transport, monitoring, storage, liability
and cost are resolved can CCS be effectively and completely addressed. The current
technological issues with capture alone are daunting. However, couple those with the
technological, environmental, cost and legal issues associated with transport and
storage of CO2 , ODEC does not believe these fundamental issues can be resolved
within 10 years, if at all.
4
131
July 6,2012
Page 5
ODEC has been and continues to be a member of the Southeast Regional Carbon
Sequestration Partnership (SECARB).
ODEC recognizes the need for these
partnerships to facilitate exploration and expansion of this nation's technological
capabilities with CCS. However, ODEC cannot and will not rush to judgment on this
issue as to its viability, affordability and applicability in the real world
A rule of this unprecedented magnitude will surely have significant unintended consequences
which will have widespread negative impact on the stability of our nation's electrical
infrastructure and our economy. Because of the significant impact this will have on the electric
generation industry as a whole, and more importantly, on ODEC's ability to construct new base
load generation that will be affordable for all of our member owners, ODEC urges the
Subcommittee to request the EPA to withdraw this rule. It's simply not workable.
Again, ODEC appreciates the opportunity to provide additional information. If you have further
questions or require any additional clarifications, feel free to contact me.
Sincerely,
David Hudgins
Director, Member & External Relations
cc (via e-mail):
Lisa Johnson
Ken Alexander
David Smith
132

COMMITTEE ON SCIENCE, SPACE, AND 'tECHNOLOGY
SUBCOMMITTEE ON ENERGY & ENVIRONMENT
Questions for the Record
The Honorable Andy Harris
and Benefits ofEnvironmental Regulations
Mr. Richard Trzupek
1. Dr. Honeycutt .described how EPA regulations rely on a series of assumptions about
current air quality causing tens or hundreds of thousands of deaths. Can you describe the
state of air quality in the United States and progress that has been made over the last
several decades? Do you think current ambient concentrations are as harmful as EPA
claims?
Regrdations and Unfunded Mandates on State, Local, and Tribal Entities, the benefits
from EPA air quality regulations that affect particUlate matter represent almost 80 percent
of al1.benefits from all regulations across the entire federal govermnent. Do you find that
claim to be credible?
3. OIRA has recommended in their Report to Congress that federal agencies shOuld conduct
a jobs analysis for major rules. In reading recent EPA rules, do you have any indication
that the Agency is looking seriously at employment impacts?
4. Do you think that recent.EPA regulatory activity is consistent with an ''all of the above"
energy policy?
5. EPA relies on particulate matter co-benefits to justify many of its regulations on the
power sector. In your view, .is EPA focusing on the most important sources of PM and
other pollutants?
6. I understand that EPA recently conducted some experiments where they exposed people
to high levels ofPM..What are the implications of these experiments?
Appendix 2
ADDITIONAL MATERIAL
(133)
FOR THE
RECORD
134
AN ECONOMIC IMPACT ANALYSIS
OF
EPAS MERCURY
RULE
AND
AIR TOXICS STANDARDS
135
Contents
INTRODUCTION ........................................................................................................................... 1
NERA's NewERA MODEL. .......................................................................................... ;.................. 1
MATCHING EPA's ANNUAL COST OF $10 BILLION IN 2015 .............................................. .1
CAPITAL COST REQUIREMENTS ARE ATTRIBUTABLE TO BOTH RETROFITS
AND REPLACEMENT CAPACITy .................................................................................. 2
Retrofits ..................................................................................................................................... .3
.Retirements ............................................................................................................................... .4
Total Capital Spending by 2015 ............................................................................................... .4
NON-CAPITAL COSTS ................................................................................................................ .4
OVERALL MACROECONOMIC IMPACTS ASSOCIATED WITH THE COSTS OF THE
MATS RULE ....................................................................................................................... 5
CONCLUSION .............................................................................................................................. ,.6
APPENDIX A - Additional Details on the NewERA Model ...........................................................7
NERA Economic Consulting
136
INTRODUCTION
On December 16,2011, EPA released its final Mercury and Air Toxics Standards (MATS) Rule,
accompanied by a Regulatory Impact Analysis (RIA) that reported the incremental cost to the
U.S. electricity sector would be $9.6 billion per year in 2015. This is a large cost to the U.S.
economy and; therefore, the Rule merits close examination. NERA has the capability to analyze
the electric sector impacts and associated macroeconomic impacts of emissions policies. In this
paper, we analyze the economic impacts of the MATS Rule. Our analysis is designed to
generally match the EPA assumptions in its own analysis, and to offer a broader range of insights
about the impacts of that Rule than EPA provided in its RIA. This paper briefly summarizes the
approach in our MATS analysis, compares our results to those that EPA has reported, and
provides some further results that are available from our own analysis. A particular addition that
this paper offers is insight into the overall economy-wide impacts of the Rule that can be
expected to result from the costs that the U.S. electric sector is projected to bear under the MATS
Rule - EPA did not provide such an economy-wide assessment in its RIA.
NERA's NewERA MODEL

NERA's analysis was performed using NERA's NewERA model. l The NewERA model is an
economy-wide economic model that includes a detailed representation ofthe electric sector. It
has been designed to assess, on an integrated basis, system costs to the power sector to meet any
specified policy scenario as well as the overall macroeconomic impacts of that policy scenario.
For the power sector, NewERA uses a unit-level representation of the power generation system
tliat considers the actions each generator takes to new policies such as MATS by providing
compliance options such as retrofitting, retiring, fuel switching and re-dispatching. The outputs
ofthe model include a variety of electric sector-specific results such as number of retrofits (and
types), number of retirements, number and types of new capacity additions, fuel usage, and total
sector costs. In addition, because the NewERA model includes all sectors of the economy we can
also evaluate changes in fuel markets (most importantly, natural gas markets) and
macroeconomic indicators such as GDP, consumption and employment measures. Additional
information about the NewERA model is included in Appendix A.
MATCHING EPA's ANNUAL COST OF $10 BILLION IN 2015

The initial focus of the analysis was to see how closely our own projected electric sector impacts
might match the analysis that EPA performed. Note that EPA only considered the impacts of the
policy on the electric sector; they did liot consider the broader economic effects ofthe Rule on
the economy that arise because of the impacts of the Rule on prices and resources throughout the
economy . EPA forecast the impacts of the ,MATS Rule using the IPM model. EPA analyzed
two policy scenarios: 1) a Baseline, which included the Cross-State Air Pollution Rule (CSAPR)
that has since been stayed by the court,2 and 2) MATS, which layers the requirements of the
For additional technical details on the NowERA model see http://www.nera.coml677607.htm.
On December 30, 2011, the United States Court of Appeals for the D.C. Circuit issued a ruling to stay CSAPR
pending judicial review.
2
137
INTRODUCTION
On December 16,2011, EPA released its final Mercury and Air Toxics Standards (MATS) Rule,
accompanied by a Regulatory Impact Analysis (RIA) that reported the incremental cost to the
U.S. electricity sector would be $9.6 billion per year in 2015. This is a large cost to the U.S.
economy and; therefore, the Rule merits close examination. NERA has the capability to analyze
the electric sector impacts and associated macroeconomic impacts of emissions policies. In this
paper, we analyze the economic impacts of the MATS Rule. Our analysis is designed to
generally match the EPA assumptions in its own analysis, and to offer a broader range of insights
about the impacts of that Rule than EPA provided in its RIA. This paper briefly summarizes the
approach in our MATS analysis, compares our results to those that EPA has reported, and
provides some further results that are available from our own analysis. A particular addition that
this paper offers is insight into the overall economy-wide impacts of the Rule that can be
expected to result from the costs that the U.S. electric sector is projected to bear under the MATS
Rule - EPA did not provide such an economy-wide assessment in its RIA.
NERA's NewERA MODEL

NERA's analysis was performed using NERA's NewERA model. l The NewERA model is an
economy-wide economic model that includes a detailed representation ofthe electric sector. It
has been designed to assess, on an integrated basis, system costs to the power sector to meet any
specified policy scenario as well as the overall macroeconomic impacts of that policy scenario.
For the power sector, NewERA uses a unit-level representation of the power generation system
tliat considers the actions each generator takes to new policies such as MATS by providing
compliance options such as retrofitting, retiring, fuel switching and re-dispatching. The outputs
ofthe model include a variety of electric sector-specific results such as number of retrofits (and
types), number of retirements, number and types of new capacity additions, fuel usage, and total
sector costs. In addition, because the NewERA model includes all sectors of the economy we can
also evaluate changes in fuel markets (most importantly, natural gas markets) and
macroeconomic indicators such as GDP, consumption and employment measures. Additional
information about the NewERA model is included in Appendix A.
MATCHING EPA's ANNUAL COST OF $10 BILLION IN 2015

The initial focus of the analysis was to see how closely our own projected electric sector impacts
might match the analysis that EPA performed. Note that EPA only considered the impacts of the
policy on the electric sector; they did liot consider the broader economic effects ofthe Rule on
the economy that arise because of the impacts of the Rule on prices and resources throughout the
economy . EPA forecast the impacts of the ,MATS Rule using the IPM model. EPA analyzed
two policy scenarios: 1) a Baseline, which included the Cross-State Air Pollution Rule (CSAPR)
that has since been stayed by the court,2 and 2) MATS, which layers the requirements of the
For additional technical details on the NowERA model see http://www.nera.coml677607.htm.
On December 30, 2011, the United States Court of Appeals for the D.C. Circuit issued a ruling to stay CSAPR
pending judicial review.
2
138
MATS Rule on top of the Baseline; the impacts of the Rule (MATS) are calculated
these two scenarios. The IPM model
incremental compliance costs to
electric
sector in 2015 would be $9.4 billion
EPA added another $0.2 billion to that cost to
monitl)rinlg and administrative costs,
accoants for EPA's total cost
did not include the extra $0.2 billion, so our cost results,
as $9.6 billion.
to IPM's estimate of $9.4 billion
stated as the aanual cost 2015, should
it is useful to convert the !PM cost estimate
results in
Since the N.wERA model
of$9.4 billion in 2007$ to
value in 2010$; $9.7 billion.
scenarios in the N.wERA model ~ a Baseline with
on top ofCSAPR. We also used EPA's
nrr,i,.r.t"tl the incremental
which is the result
1 compares our cost results to those
NERA
more years, and also
Figure 1: Comparisoll of Allnoalized Illcremwtlli Compliauee Costs for MATS, Relative to CSAPR
CAPITAL COST REQUIREMENTS ARE ATTRIBUTABLE TO BOTH

RETROFITS AND REPLACEMENT CAPACITY
electric sector must not
'with the MATS Rule, but will
with CSAPR, which has been
U.S. Court
invest\l1ents that will need to be made ro
with
also work towards
with MATS, it useful to also
relative ro a Baseline that
Clean Air Interstate
the MATS Rule
Rule (CAIR), which specifies the current S02 and NOx limits that generators must meet.
evaluating !l. scenario that did not include CSAPR in the Baseline and
the actual
CAIR is assumed to
of a
Thus, we are
to make
tl1at includes
the
and CSAPR with one that includes
but does
not include either the MATS Rule or CSAPR, The
results
are
unless otherwise stated.
based on this
Regulatory Impact Analysis for the Final Mercury llIld Air Toxics Standards, December 2011, p. 3-13.
2
NEAA Economic Coosullll\ll
139
There are some important details about costs that EPA did not report, but that we can report from
our own analysis based on the NewERA model. One of these is the level of total capital that
electric companies will need to raise within the implementation period. EPA only reports the
annual capital payments that companies incur over time to "pay back" the upfront spending.
Annualized costs have relevance because they may affect electricity rates. However, the level of
spending that mllst occur upfront is of relevance for other reasons. For example, it indicates how
leveraged companies may have to become, which can afJ:ect their borrowing costs and their stock
valuate.
The capital costs are associated with both pollution control retrofits and new capacity to replace
capacity retired as a result oftbe Rule. Reporting only the annualized costs masks the significant
increase in capital that would be required in order to ~'Omply with the MATS Rule. We thus tum
to the key drivers of capital spending prior to 2015.
Retrofits
EPA's analysis shows that in 2015 the MATS Rule (incremental to CSAPR being fully
implemented first) will entail 60 OW Qfscrubber retrofits (wet scrubbers, dry scrubbers and dry
sorbent injection combined), 63 OW of scrubber upgrades, 99 OW of activated carbon injection
(ACI) and at least 102 OW of fabric filters.6 In contrast, our analysis shows an incremental 64
OW of scrubbers, 70 OW of ACI and 124 OW of fabric filters (the scrubber retrofit numbers are
70 OW if compared relative to CAIR). The details on the retrofits are in Figure 2.
Figure 1: Summary oUlllS Retrofit Additions
Total
WFGD
1)FGD
1)SI
Scrub
SCR
ACl
fT
55
70
.3
19
44
60
99
102
CArR
18
18
15
4:
CSAPRJMATS
19
47
22
88
16
78
128
Delta/fom CAlR
1
47
Note: Deltas may not add up due to rounding.
22
70
70
124
SCClllll'io
Base (CSAPR)
Delta
Regulatory Impact Analysis for the Final Mercuty and Air Toxies Standards, p. 315.
3
NEAA Economic Consulting
140
Retirements
The other component of the capital sPending relates to new capacity to replace coal-fired
generators that economically retire due to the compliance requirements of the MATS Rule. EPA
projects that the MATS Rule will result in an incremental 5 GW of coal-fired capacity retiring by
2015 relative to CSAPR. Our analysis of the MATS Rulehas an incremental 19 GW of coalfired capacity retiring as a result of the MATS Rule relative to CSAPR. We project 23 GW of
retirements relative the Baseline without CSAPR. We note, however, that the Baseline without
CSAPR has 15 GW of retirements in it, so that the total capacity retired through 2015, once both
CSAPR and MATS are applied, is 38 GW. (It is about the same even if only the MATS Rule is
imposed on top of the CAIR-only Baseline.) Almost all of the incremental retirements are in
states east of the Mississippi River.
Some of the retired capacity is replaced by new natural gas-fired combined cycle units. This has
to occur in some locations in order to maintain reserve margins. 7 However, when reserve
margins do not force replacement capacity, a significant part of the generation that comes from
those retired units in the Baseline is replaced by greater generation from existing natural gas
combined cycle units in the same region. Nationally, by 2015 there is an incremental build of 1
GW of natural gas combined cycle units and an incremental build of 1.5 GW of combustion
turbines driven by the MATS and CSAPR Rules combined. (It is about the same even if only the
MATS-Rule is imposed on top oftheCAIR-only Baseline.)
Total Capital Spending by 2015

Thus, there are capital costs incurred due to retrofits and replacement capacity. Between 2012
and 2015, the model projects that this capital requirement would be $84 billion to comply with
both MATS and CSAPR. This represents a 30% increase over the capital requirements in a
Baseline with either CAIR or CSAPR. Such an increase might create financing challenges for
individual operating companies and the sector as a whole, which could lead to credit downgrades
and possibly higher costs of borrowing. We have not attempted to include these potential costs
in our estimates (nor has EPA included them in theirs).
NON-CAPITAL COSTS
The capital spending is the most significant feature of the costs. In addition, there are increased
costs of generation that are due to: the greater use of natural gas to displace the coal-fired plants
that retire specifically as a result of the MATS Rule, operating costs of the retrofits, and the
reductions in unit efficiencies resulting from the retrofits themselves. s To some extent, these
added operating costs are offset by reduced costs of maintaining the coal plants that are retired.
The net effect of these operating costs, plus the annualized capital payments for the $84 billion in
investment, is reflected in the total costs that were reported in Figure 1.
7
Each region in the model has a reserve margin. If the available capacity relative to the region's peak demand
falls below the required reserve level then capacity must be added to the system.
The retrofits often require additional power from the facility to operate, resulting in a net reduction in the
efficiency of the plant.
4
141
OVERALL MACROECONOMIC IMPACTS ASSOCIATED WITH THE
COSTS OF THE MATS RULE
The consequences of the MATS Rule are not just limited to the electric sector. The electric
sector has to invest significant capital to comply with the MATS Rule. This capital and other
added spending for compliance will induce lower industrial output (because the cost of power,
natural gas, and other commodities will increase) and hence drive down income for workers.
Although the investments also will create jobs installing the retrofits and building new power
plants, the net effect of complying with the MATS Rule will be an increase in the costs of
electricity and natural gas, and will produce a drag on the economy as a whole. EPA did not
evaluate the MATS Rule using a macroeconomic model so they could not produce a net impact
on jobs; instead they cited an c,;,timated 46,000 short-term jobs and 8,000 long-term utility jobs
created.9
Because the N.wERA model integrates electric sector costs with the rest of the economy, our
analysis also directly estimates the impacts on wages and net employment as a result of the
MATS Rule~ Our estimate of the net impact (inclusive ofjob gains associated with installing
retrofits and building new power plants) of the MATS Rule in 2015 is a loss in income
equivalent to 180,000 full-time jobs (215,000 full-time jobs if compared relative to CAIR).
Figure 3 shows that while the largest job losses are in 2015, there are continuing job losses over
time as the economy shrinks due to higher energy costs.
Figure 3: Change In Full-Time Joh Equivalents
CSAPRIMATS (relative to CAIR)
-215
-15
-75
-85
The costs ofthe MATS Rule are also reflected in several other common economic measures.
For example, the present value ofGDP losses from 2012 through 2035 would be between $84
and $112 billion dollars ($84 billion is relative to CSAPR, $112 billion is relative to CAIR).
Figure 4 shows the annual GDP losses and the present value loss through 2035. Not
surprisingly, the largest loss is in 2015 when the MATS Rule is assumed to be fully
implemented.
Regulatory Impact Analysis for the Final Mercury and Air Toxies Standards, p. 61.
5
NERA Economic Consuftlng
142
Figllre 4: Challge ill Gross Domestic Product
CSAPRfMATS
(relative to CAIR)
-$3
-$25
$1
-$4
-$7
-$7
-$7
-$7
Similar to GOP, the MATS Rule also leads to losses

income for
would be between
conswners. The
value
losses from
$35 and $71.
dollars ($35 billion is relative to CSAPR, $71.
is relative to CAIR).
Figure 5 shows the annual
losses and the present value loss through 2035. For
consumption, the largest losses are 2012 as investment has to ramp to meet the 2015
coroo!iam:e deadline, which requires a diversion of funds from
investment.
Figure 5: Change iu Cousumptlnu (billions, 20U,S
CONCLUSION
with IPM find that
further than EPA's analysis in a few different

of (:0l11lPlying with the MATS Rule relative to a Baseline
that the electric sector
and
6
NEAA Ecooomic Consulting
143
APPENDIX A - Additional Details on the NewERA Model
NERA developed the NewERA model to forecast the impact of policy, regulatory, and economic
factors on the energy sectors and the economy. When evaluating policies that have significant
impacts on the entire economy, one needs to use a model that captures the effects as they ripple
through all sectors of the economy and the associated feedback effects. The NewERA model
combines a macroeconomic model with all sectors of the economy (except for the e1ectric.sector)
with a detailed electric sector model. This combination allows for a complete understanding of
the economic impacts of different policies on all sectors of the economy.
The macroeconomic model incorporates all production sectors and final demand of the economy.
Policy consequences are transmitted throughout the economy as sectors respond until the
economy reaches equilibrium. The production and consumption functions employed in the model
enable gradual substitution of inputs in response to relative price changes, thus avoiding all-ornothing solutions.
The main benefit of the integrated framework is that the electric sector can be modeled in great
detail yet through integration the model captures the interactions and feedbacks between all
sectors of the economy. Electric technologies can be well represented according to engineering
specifications. The integrated modeling approach also provides consistent price responses since
all sectors of the economy are modeled. In addition, under this framework we are able to model
electricity demand response.
There are great uncertainties about how the U.S. natural gas market will evolve, and the NewERA
model is designed explicitly to address the key factors affecting future natural gas supply and
prices. One of the major uncertainties is the availability of shale gas in the United States. To
account for this uncertainty and the subsequent effect it could have on the domestic and
international markets, the NewERA model includes resource supply curves for U.S. natural gas.
The model also accounts for foreign imports and U.S. exports of natural gas, by using a supply
(demand) curve for U.S. imports (exports) that represents how the global LNG market price
would react to changes in U.S. imports or exports.
The electric. sector model is a detailed model of the electric and coal sectors .. Each of the more
than 17,000 electric generating units in the United States is represented in the model. The model
minimizes costs while meeting all specified constraints, such as demand, peak demand,
emissions limits and transmission limits. The model determines investments to undertake and
unit dispatch. Because the NewERA model is an integrated model of the entire U.S. economy,
electricity demand can respond to changes in prices and supplies.
The steam coal sector is represented within the NewERA model by a series of coal supply curves
and a coal transportation matrix. The NewERA model represents the domestic and international
.
crude oil and refined petroleum markets.
The NewERA model outputs include demand and supply of all goods and services, prices of all
commodities, and terms of trade effects (including changes in imports and exports). The model
outputs also include gross regional product, consumption, investment, disposable income, and
changes in 'job equivalents" based on labor wage income.
7

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EPAS IMPACT ON JOBS AND

ENERGY AFFORDABILITY: UNDERSTANDING

SUBCOMMITTEE ON ENERGY AND

COMMITTEE ON SCIENCE, SPACE, AND

WEDNESDAY, JUNE 6, 2012

Serial No. 11288

U.S. GOVERNMENT PRINTING OFFICE

For sale by the Superintendent of Documents, U.S. Government Printing Office

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

HON. ANDY HARRIS, Maryland, Chair

Witness List .............................................................................................................

Appendix 1: Answers to Post-Hearing Questions

Appendix 2: Additional Material for the Record

EPAS IMPACT ON JOBS

EDD!E BERNICE JOHNSON, TEXAS

U.S. HOUSE OF REPRESENTATIVES

COMMITIEE ON SCIENCE, SPACE, AND TECHNOLOGY

Subcommittee on Energy & Environment

The Honorable Cass Suustein, Administrator, Office ofInformation and Regulatory

The Honorable Cass Sunstein, Administrator, Office ofInformation and Regulatory

77 Federal Register 22392.

Total Pending Actions: 155

7 http://www.whitehouse.gov/sites/defaultlfiles/omb/oira/draft 2012 cost benefit reporl.pdf.

Moving the goalposts

liliiii (o,ool1efits vi....dIKed fino partkl

Previous Guidance to Agency

SUBCOMMITTEE CHAIRMAN ANDY HARRIS

I want to welcome everyone to this afternoons hearing on EPAs Impact on Jobs

Mr. MILLER. Thank you, Chairman Harris.

SUBCOMMITTEE RANKING MEMBER BRAD MILLER

Thank you, Chairman Harris.

Mr. HONEYCUTT. Good afternoon, Mr. Chairman and Members of

Changes in PM2 . 5 methodology

Inflated benefit!cost ratio

and Environmental Epidemiology. 10(5):427-36.

Thank you for the opportunity to give this testimony.

Average Annual PM Z.5

Eftimet al. Epidemiology. 2008 Mar;19(2):20916.

EPA's Benefit Cost Analysis

Susana Hildebrand, P.E., Chief Engineer

CAAA Benefic Cost Analysis

TCEQ Chief Engineer's Office

May 17, 2012 {;,

. . Texas Commission on Environmental Quality

CAAA Benefit Cost Analysis. TCEQ Chief Engineer's Office

May 17, 2012

CAAA Benefit Cost Analysis

TCEQ Chief Engineer's Office May 17, 2012

TCEQ staff examined this analysis, focusing on:

Regulatory Impact Analyses

President requires RIAs (Regulatory Impact Analyses) from

- (OMB circular A4, 09/2003)

RIAs are NOT subject to peer or public review

CAAA Benefit Cost Analysis

TCEQ Chief Engineer's Office

May 17, 2012

RIA should help determine if the benefits of an action are

Key legislation - Executive Orders